Wednesday, March 29, 2017

Home Sales … Crude Inventories … Stock Market Analysis … Trading ETFs and ETF Ranking

“Pending home sales rebounded sharply in February to their highest level in nearly a year and second-highest level in over a decade…The Pending Home Sales Index, an indicator based on contract signings, jumped 5.5 percent…” Story at…
“The nation’s record-high stockpile of crude oil rose by another 900,000 barrels last week, but that was more than offset by large draw downs in fuel inventories.” Story at…
-Wednesday the S&P 500 was up about 0.1% to 2361.
-VIX slipped about 1% to 11.42.
-The yield on the 10-year Treasury slipped to 2.379%. (Traders sold bonds and bought stocks.)
Advancers were well ahead of declining stocks today and up-volume outpaced down. 53.8% of stocks on the NYSE have advanced over the last 10-days. I’d expect follow thru to the upside in the near term.  The Pros aren’t so sure; late day action was down again on the day; but late-day action is flat over the last 10-days so that’s a neutral indication. I remain short-term bullish.
Recently the Financials (XLF) have been falling and my momentum rank hasn’t moved much. I looked back at some of the prior analysis and decided to use my older version of the Momentum System. This makes some significant changes. Under the older system, XLF dropped out of the top 3 last week and Utilities (XLU) and Emerging Markets (SCHE) moved up.  I would caution that XLU may drop quickly if there is no correction in the near future; and XLF may recover quickly if bond yields rise as they may without a correction.
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) & XLE; currently their 120-dMAs are declining.
Recommended ETF Portfolio of top 3:
1. Technology Select Sector SPDR ETF (XLK)
2. Schwab emerging Markets (SCHE)
3. ITA, SPY, XLY, and XLV are all essentially tied for third.
XLU was actually 2nd, but I am not inclined to recommend it unless it appears a defensive position is required. Financial Select Sector SPDR (XLF) is close enough to own if one believes that interest rates will rise.
(I took positions in XLF and XLK Wednesday, 29 March.)
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
I closed all remaining short positions on 3/28/2017.  My losses were big enough that I am too embarrassed to list them here.
-Rydex S&P 500 2x Strategy. Established 3/28/2017
-SSO. Established 3/28/2017
-“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 turned 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). 
Wednesday, Sentiment was negative (Bullishness is at an extreme.); Price, Volume & VIX indicators were neutral.
I increased stock allocation to 50% stocks in the S&P 500 Index fund (C-Fund) Friday, 24 March 2017 in my long-term accounts, based on short-term indicators. Remainder is 50% G-Fund (Government securities). This is a conservative retiree allocation based mostly on low volume at the test of the recent bottom.
There have been no long-term Buy or Sell signals in a while.  The last signal was a BUY on 23 February and the last actionable signal was a BUY (from a prior sell) on 15 November 2016.