Thursday, February 23, 2017

Unemployment Claims … Crude Inventories … Kansas City FED … Stock Market Analysis … Trading ETFs and ETF Ranking

“The number of Americans filing for unemployment benefits rose slightly more than expected last week, but the four-week average of claims fell to its lowest level since 1973, pointing to strengthening labor market conditions.” Story at…
“After three straight weeks of builds in commercial oil inventories, today, the EIA had some more bad news for traders. The authority reported a build of 600,000 barrels…” Story at…
“The Federal Reserve Bank of Kansas City released the February Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded further with continued strong expectations. “This was the highest reading for our month-over-month composite index since June 2011,” said Wilkerson. “In addition, the future composite index was the highest since our survey switched to a monthly frequency in 2001.” Press release at…
-Thursday the S&P 500 was up 1pt to 2364.
-VIX dipped about 0.3% to 11.71.
-The yield on the 10-year Treasury slipped to 2.376%.
Call out the militia the S&P 500 didn’t make a new high for 2-days in a row – those Wall St. millennials will be rioting soon. Worse yet, there was late day selling that may indicate the Pros are getting concerned about this rally. Volume was a little more than 10% above normal and one must go back to the end of January to match the volume total. Panic is setting in – no, not really. The markets remain waiting until we see some real downdraft.  Signals are pointing down, but there’s nothing new about that.
The closing tick was again strong at 484. The 10-day average of Closing Tick remains at a very high 549. A number above 300 is a bearish sign.
RSI (Relative Strength Index) and the old Advance-Decline Ratio remain oversold.  RSI was above 90 for the third day in a row. Bollinger Bands are not oversold, but they were just 2-days ago so this is still a bearish indication.
The Sum of 16-Indicators is somewhat bullish at +4, down 1 from yesterday.  None of the bullish indicators are very strong, so not much has changed.
Tell me if you have heard this before: The Market is overextended, but NEVER MIND; stocks appear that they will keep going up forever. EVERYONE IS BULLISH.
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 iEAFE; currently its 120-dMA is declining.
Recommended ETF Portfolio of top 3:
1. Financial Select Sector SPDR (XLF)
2. iShares U.S. Aerospace & Defense (ITA)
3. iShares Russell 2000 (IWM); Industrial Select Sector SPDR ETF (XLI); and Technology Select Sector SPDR ETF (XLK) are essentially tied for third.
I have not yet established a position based on the ETF Ranking; I am waiting for a better entry point. Neither IWM nor XLI will perform well in a pullback. The best performers today were Utilities (XLU) and the IShares Dividend (DVY).  Investors may be anticipating a pullback, but traders tend to move into these funds at the drop of a hat, i.e. every down day.  
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 remained 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, Volume & Price were positive; Sentiment & VIX indicators were neutral.
There are enough signals calling for a pullback, I suggest waiting to buy.  The system has some trend following indicators that are bullish near a top.
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.