“Led by improvements in employment-related indicators,
the Chicago Fed National Activity Index (CFNAI) increased to +0.34 in February
from –0.02 in January. All four broad categories of indicators that make up the
index increased from January, and only one of the four categories made a
negative contribution to the index in February.” Press release at…
THE BIG FOUR INDICATORS - RECESSION? NAH.
“…there are four big indicators that the [NBER] committee
weighs heavily in their cycle identification process [regarding recession].
They are: Nonfarm Employment; Industrial Production; Real Retail Sales; Real
Personal Income (excluding Transfer Receipts). – Jill Mislinski, Advisor
Perspectives.
Commentary and Charts at…
My cmt: The curve is nearly flat in the 1st quarter
of 2017; no recession in here.
JUST BUY EVERYTHING (Real Investment Advice)
“With the hopes of accelerated earnings recovery being
muted by falling oil prices, higher borrowing costs, and a strong dollar, investors seem willing to forgo the basic fundamentals
of investing to chase an already extended and aging bull market cycle.
This was noted yesterday in a note from Goldman’s
Jan Hatzius, the chief economist warns that the market is over-interpreting the
Fed’s statement, and Yellen’s presser, and cautions that it was not meant to be the “dovish surprise” the market took it to be.” Commentary at…
RON PAUL ON OBAMACARE (SafeHaven)
“This Thursday, the House of Representatives will vote on
a Republican bill that supposedly repeals Obamacare. However, the bill retains
Obamacare's most destructive features….The underlying problem with the
Republican proposal is philosophical. The plan put forth by the alleged
pro-free-market Republicans implicitly accepts the premise that healthcare is a
right that must be provided by government. But rights are inalienable aspects
of our humanity, not gifts from government. If government can give us rights,
then it can also limit or even take away those rights. Giving government power
to enforce a fictitious right to healthcare justifies government theft and
coercion. Thievery and violence do not suddenly become moral when carried out
by governments.” Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was down about 0.2% to 2373.
-VIX rose about 0.5% to 11.34.
-The yield on the 10-year Treasury slipped to 2.462%.
(Investors bought bonds.)
As John Hussman frequently reminds us, just because event
X has been followed by event Y in the past, when it comes to the stock market,
making a prediction that event X will be followed by event Y in short order is
an iffy proposition.
Sometimes the investing mood changes and blows out the
old indicators, i.e. events that in the past have resulted in pullbacks, become
false profits when rampant bullishness takes over. With that in mind, let’s review topping
indicators so far:
(1) The Overbought/Oversold Ratio turned overbought on 16
November and has signaled overbought 25-trading days (more than a month) since
then.
(2) Relative Strength Index (RSI, 14-day SMA) turned
overbought on 22 November and has signaled overbought 12-trading days since
then.
(3) Bollinger Bands signaled overbought on 7 December and
have signaled overbought 10-trading days since then based on the Index
exceeding the upper band limit. In
addition, as of 17 March there is a Bollinger Band squeeze under way – another
Bearish topping indicator.
(4) Sentiment (%-Bulls based on funds invested in Rydex-Guggenheim,
Bull/Bear funds) reached extreme bullishness (a bearish signal) as high as
those seen during the dot.com bubble on 3 November and has remained there for
26-trading days since then.
(5) A measure of Breadth (Advance-Decline line) compared
to the S&P 500 indicated that the S&P 500 was way too far ahead of its
underlying internals initially on 7 September and then from 5 December thru 31
January; the Index remains stretched compared to its supporting internals.
(6) On 14 February the S&P 500 had closed positive
for 9 out of 10-treading days. That
extreme event happened 3-times over the ensuing 7-trading days. By 1-March,
there had been only 4-down days over an entire month of trading; and that’s
another related bearish signal.
(7) New-High/New-Low data began calling for a decline on
6 March.
(8) The 10-dMA of late-day action has signaled selling at
various times from 5 January thru 10 March.
All of these signs have been for naught so far. So we might go back and see if we can find an
indicator that was accurate in the bullish run-up to the 2008 Financial Crisis.
It turns out there was one and it was fairly straight forward. When the S&P 500 exceeded its 200-day
moving average by more than 9.5%, there was a good correlation for a
pullback. While this was a regular occurrence
before the Financial Crisis, the indicator lost usefulness after the crisis as
investors correctly recognized that the market had bottomed and the proper
stance was extreme bullishness. Is extreme
bullishness the correct stance now? – I don’t think so. PE’s are too high. Sentiment
is extreme. This looks like 2007. So I
think the fact that the Index was 9.7% above its 200-dMA at the beginning of
the month is a signal indicating a short-term top. I think this indicator, now,
is reliable and should be believed.
I’m not suggesting that the market is going to crash; but
a pullback is probably underway, and if it isn’t, the upside remains limited.
My sum of 16-indicators improved +4. Money trend is moving up, but overall I think
the slow decline we have seen since 1 March will continue. So far the Index has
dropped about 1% since its high on 1 March.
If the drop continues at this slow pace, the odds are that it won’t drop
as much as 5%.
CURRENT RANKING OF 15 ETFs (Ranked Daily)
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, the number 1 ranked Financials (XLF) outperformed
the S&P 500 by nearly 20%.
*For additional background on the ETF ranking system see
NTSM Page at…
I would avoid iEAFE (Europe and Far East); currently its
120-dMA is declining, but its slope is flatter over the past couple of days.
Recommended ETF Portfolio of top 3:
1. Financial Select Sector SPDR (XLF)
2. iShares U.S. Aerospace & Defense (ITA)
3. Technology Select Sector SPDR ETF (XLK)
I have not yet established a position based on the ETF
Ranking; I am waiting for a better entry point.
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.
NET:
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.
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained Positive 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).
LONG TERM INDICATOR
Monday, Price was positive; Sentiment was negative
(Bullishness is at an extreme.); Volume & VIX indicators were neutral.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I reduced stock
allocation to 25% stocks in the S&P 500 Index fund (C-Fund) Wednesday, 1
March 2017 in my long-term accounts. Remainder is 75% G-Fund (Government
securities). This is a conservative retiree allocation based mostly on
short-term signals.
