Thursday, February 9, 2017

Payroll Claims / Wholesale Inventories … … Recession? Not likely, but an Indicator says, “Yes” … Larry Fink Interview … Stock Market Deterioration … Stock Market Analysis … ETF Ranking

“The number of Americans filing for unemployment benefits unexpectedly fell last week to near a 43-year low…….Initial claims for state unemployment benefits dropped by 12,000 to a seasonally adjusted 234,000 for the week ended Feb. 4…
…inventories at wholesalers surged in December for a second straight month and sales recorded their biggest increase since 2011, signs of confidence in the economy as domestic demand strengthens” Story at…
My cmt: If this doesn’t wake up the FED, I don’t know what will.
“Gasoline purchases can be a powerful signal about the consumer economy, and last month's drop off in demand was downright recession-like. But economists don't see a recession, and energy analysts say demand picked back up in the last week to a more normal level…In a report Wednesday, Goldman Sachs analysts said while they don't believe there is a recession, they noted that the implied drop of 460,000 barrels a day in January, or 5.2 percent year over year, is the kind of tumble seen only during a recession.” Story at…
…“I see a lot of dark shadows that could impact the direction of the marketplace,” Fink [BlackRock Chief Executive Larry Fink] said…One chart that Fink calls “horrifying” is the climb of consumer confidence along with the S&P 500 index reasoning that the time to buy stocks was when both the S&P 500 and consumer confidence were at lows, like in 2009. Now with both at highs, investors are saying, “Maybe you should be selling now,” he said…“I believe we’re in the midst of a slowdown as we speak, because of all the uncertainty”…Interview and charts at… 
Chart from…
The chart speaks for itself. It may not yet be obvious in the S&P 500 Index price, but stocks are falling as shown by the green line (% of stocks above their 50-dMA.) while the S&P 500 made a new all-time high today, it should be noted that the NYSE Composite did not.
-Thursday the S&P 500 was up about 0.6% to 2308.
-VIX fell about 5% to 10.94.
-The yield on the 10-year Treasury rose to 2.397%. (Since the yield is an inverse to price, this means investors were selling Treasuries.)
-The “calm-before-the-storm” indicator (based on statistical analysis of market volatility) continues to call for a big down move in the markets as it has for a month. VIX is giving the same warning.  Market participants are too complacent; or perhaps too confused.
-Some believe that high unchanged volume is a top indicator. In theory, high volume in stocks where the price doesn’t change indicates confusion by investors. Today was the 3rd in a row with unchanged volume above 75,000,000 shares. (That number is about 50% higher than normal.)
-Today was another statistically significant up-day (based on statistical analysis of market volatility) and that is followed by a down-day about 62% of the time. Further, this is the 7th statistically-significant day in the last 16-trading sessions and that sort of movement, usually occurs near or at a top.
-Sentiment remains at extreme levels as high as those seen during the bubble. (Measured as %-Bulls (Bulls/{bulls+bears}) based on the amounts invested in Rydex/Guggenheim mutual funds.) Sentiment is currently at 80%-bulls (as of Wednesday’s close).
-The Sum of 16-indicators went from -4 to -1 a slight improvement, but the 10-day values are falling.
-Bollinger Bands are giving a bearish signal. Money Trend is down today. 
-The 10-dMA of closing Tick is 537, a very Bearish number. (300 is the sell point.)
-The S&P 500 Index broke above the upper Bollinger Band (2-std-deviations) so that indicator is in the “very bearish” zone now, giving a clear sell signal.
-Advancing volume continues to decline and the chart clearly shows that advancing volume is exhibiting lower highs – a clear bearish indication.
Broken Record Report: As I’ve said for a while, I think the upside potential is limited while the downside risk is fairly high, at least for a short-term pullback. I remain a short-term bear; Long-term I am a Bull.
CURRENT RANKING OF 11 ETFs (Ranked Daily)*
#1 RANK for the past 66-days: Financial Select Sector SPDR ETF (XLF).
Here’s today’s complete result of the ETF Ranking.
I would avoid IBB and XLV; currently their 120-dMAs are declining.
*For background on the ETF ranking system see NTSM Page at…
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. Commentary at…
OK, OK. I’ll be more prudent next time.
-10-day moving average of the percentage of stocks advancing (NYSE): 52.5%. (50.8% prior trading-day.) A number above 50% is usually BULLISH for the markets short-term.
-150-day moving average of advancing stocks: 52.5%. (A value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: Improved from -6 to +33 (percentage calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +157 (It was +53 prior trading day.)
-10-day moving average of the change in spread: -10. In other words, over the last 10-days, on average, the spread has decreased by 10 each day.
Market Internals switched to Neutral 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). 
Thursday, Sentiment was negative.  VIX & Volume indicators were neutral. The Price indicator was positive.
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.