Saturday, February 18, 2017

Leading Economic Indicators … Trump Impeachment Unlikely but … Stock Market Analysis … Trading ETFs and ETF Ranking

Posting late due to unexpected events.
LEI (Conference Board)
“The Conference Board Leading Economic Index® (LEI)for the U.S. increased 0.6 percent in January to 125.5 (2010 = 100), following a 0.5 percent increase in December, and a 0.2 percent increase in November. “The U.S. Leading Economic Index increased sharply again in January, pointing to a positive economic outlook in the first half of this year,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The January gain was broad based among the leading indicators. If this trend continues, the U.S. economy may even accelerate in the near term.” Press Release at…
Trump’s campaign comment, “Russia, if you’re listening, I hope you’re able to find [Hillary’s] 30,000 emails that are missing” may prove to be his worst joke and a bigger blunder since most of his opponents take Trump’s every word literally. More to the point…
I read Spy Catcher by Peter Wright, retired MI5 (British Intelligence) Assistant Director a few years ago. It tells how the British and Russians spied on each other during the cold war. I mention this to point out that, based on the book, there is a high probability that every single contact the Trump people had with Russian operatives was recorded. If Trump isn’t completely truthful regarding those Russian contacts, he could be in serious trouble. As noted yesterday…
“If Trump's team were found to have conspired with Russia to interfere in the election, experts believe this could constitute grounds for impeachment under anti-treason laws." Story at…
-Friday the S&P 500 was up about 0.2% to 2351 (another new high).
-VIX dropped about 2% to 11.496.
-The yield on the 10-year Treasury slipped to 2.418%.
There was a strong close Friday as the S&P 500 jumped 10-pts higher in the afternoon; but on the day, decliners outpaced advancing-stocks and down-volume exceeded up-volume.  Based on Friday’s numbers, Friday looked like a fake-out day rather than one that should maintain confidence in the rally.
-Longer-term, late day action suggests the Pros are lightening up after the big bull run.
- RSI is giving a sell signal. Bollinger Bands gave a sell signal Wednesday. They are usually pretty reliable signs. They’re not perfect, both were giving sell signals back in December, but other conditions have deteriorated since then.
-The % of stocks above their 50-dMA was 51% Friday; at the high in December that figure was 63%.
-Unchanged volume was an extreme high 133-million shares Thursday and 105,000 Friday. That suggests confusion by investors and some believe that this is indicative of a top. I never found a great correlation there, but it does make a certain sense.
-Closing Tick remains at an extreme high, a bearish sign.
As previously noted, the Market is overextended, but NEVER MIND; stocks appear that they will keep going up forever. EVERYONE IS BULLISH. CAUTION: When everyone is bullish, there is no one left to buy and prices must fall because demand is limited. 
The top ranked ETF receives 100%. The rest are then ranked based on their momentum relative to the leading ETF.  While momentum isn’t stock performance per se, momentum is closely related to stock performance. For example, over the 4-months from Oct thru mid-February 2016, Financials (XLF) have outperformed the S&P 500 by nearly 20%.
*For additional background on the ETF ranking system see NTSM Page at…
I would avoid XLU and iEAFE; currently their 120-dMAs are declining.
Recommended ETF Portfolio of top 3:
Financial Select Sector SPDR (XLF)
iShares U.S. Aerospace & Defense (ITA)
iShares Russell 2000 (IWM)
Also, the Industrial Select Sector SPDR ETF (XLI) Technology Select Sector SPDR ETF (XLK) are close to the others.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
Rydex 2x Short S&P 500 (RYTPX): Established 6 Dec.
2x Short S&P 500 (SDS): Established 16 Dec.
Long Volatility ETN (VXX): Established 6 Jan 2017.  
Now I wish I had tightened trading rules sooner. I am underwater again!
-“In a bull market, you can only be long or neutral.” – D. Gartman
-“The best policy is to avoid shorting unless a major bear market is underway and downside momentum has been thoroughly established. Even then, your timing must sometimes be perfect. In a bull market the trend is truly your friend, and trading against the grain is usually a fool's errand.” – Clif Droke.
 “There are two kinds of forecasters. Those who don’t know, and those who don’t know they don’t know.”- John Kenneth Galbraith.
Market Internals switched to Negative on the market.
Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  In 2014, using these internals alone would have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on Negative – no shorting). 
Friday, Price was positive; Sentiment, VIX & Volume indicators were neutral.
I increased stock allocation to 50% stocks in the S&P 500 Index fund (C-Fund) Friday, 23 Sep 2016 in my long-term accounts. Remainder is 50% G-Fund. This is a conservative retiree allocation.