Thursday, March 2, 2017

Jobless Claims … Margin Debt … Investors are Selling Stocks … Stock Market Analysis … Trading ETFs and ETF Ranking

“The number of Americans filing for unemployment benefits fell to near a 44-year low last week, pointing to further tightening of the labor market even as economic growth appears to have remained moderate in the first quarter…Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 223,000 for the week ended Feb. 25…” Story at…
“The NYSE has released new data for margin debt, now available through January. The latest debt level is up 4.9% month-over-month. The current level is at its record high. Note the inflation-adjusted version is just off its record high in April 2015. The January data gives us an additional sense of investor behavior since the start of the new administration.” – Jill Mislinsky.
Charts, commentary and analysis at…
“US investors sold stocks for the second consecutive week last week after having been net buyers for the prior 14 weeks since the election, that’s according to Bank of America Merrill Lynch’s weekly client flow trends report.” Story at…
-Thursday the S&P 500 was down about 0.6% to 2382.
-VIX dropped about 6% to 11.81. (I can’t explain that.)
-The yield on the 10-year Treasury rose to 2.479%. (The Bond Ghouls were selling; I guess the rate-hike fears are worrying them.)
The sum of 16-indicators was -4 today and the longer trend remains down. Money Trend is pointing down. It looks like the Pros are selling based on Late-day action that has been trending down on average over the last month; late day selling was yooouuuge today.
Volume picked up and was about 5% over the monthly normal today so there is some conviction in this downturn. (Light volume would have looked squirrely.) It looks like the long-awaited correction may have finally arrived. The buy-the-dippers should be moving in soon.  The early buyers may be disappointed this time; I’m guessing a 5-6% drop is in the works.
Every one of the ETFs I track was down on the day except for Utilities.  This just shows how the active traders react to a downturn. They took profits after hours.
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) and SCHE (emerging markets); currently their 120-dMAs are declining.
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)
XLI was slightly ahead of the XLK, but not enough to change the recommendation.  Further, if there is a correction, XLI is likely to be among the worst performers.
I have not yet established a position based on the ETF Ranking; I am waiting for a better entry point.
Energy (XLE) was in 13th place today vs 3rd place in January. If Energy continues to slide the S&P 500 is likely to follow. 
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 declined 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). 
Thursday, Price was positive; Sentiment Volume & VIX indicators were neutral.
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.