Friday, March 31, 2017

Personal Spending … Chicago PMI … Michigan Sentiment … Stock Market Analysis … Trading ETFs and ETF Ranking

“U.S. consumer spending rose less than forecast in February even as wage growth improved, according to government data that also showed inflation reached the Federal Reserve’s goal for the first time in almost five years. The 0.1 percent advance in consumption followed a 0.2 percent gain the prior month…” Story at…
CHICAGO PMI (MarketWatch)
“A reading of Chicago-area economic activity nudged higher in March to cap the strongest quarter in more than two years, a sign of the growing business optimism since the election of President Donald Trump. The Chicago PMI rose to 57.7 in March…” Story at…
“Consumer sentiment rose in March as Americans registered sunnier views about the state of their finances while becoming less upbeat about the long-term economic outlook, University of Michigan survey data showed Friday.” Story at…
“Fighting wars, big tax cuts and economic stimulus packages have all added to the debt burden” Story at…
-Friday the S&P 500 was down about 0.2% to 2363.
-VIX rose about 7% to 12.37.
-The yield on the 10-year Treasury slipped to 2.385%. (Traders sold stocks and bought bonds.)

It’s all about the chart.  The S&P 500 climbed to the descending trend line shown by the Red arrow, but was unable to close above the line.  To break the down trend, most traders would say the Index must close above the trend line on consecutive days or it must close 3% above the line.
The Index made it up to 2370 (at the line), but tanked in the last half hour of trading. Perhaps traders (or the computers) panicked.
While it failed today, there wasn’t much bad news below the surface on the NYSE. The Russell 2000 was up 0.26% although it too had a late day swoon. Advancing stocks outpaced decliners and up-volume was higher than down-volume. New-highs were well ahead of new-lows. While the Index gave up its gains in the last half hour, closing Tick (the sum of last trades of the day) was a very high +740. Apparently, there were a lot of buy-at-the-close orders.  Over the last 10-days 54.3% of stocks on the NYSE have advanced. On the day, 59% advanced and that’s reasonably bullish.
There are some bearish signs though. Industrial Cyclicals (XLI) are underperforming the S&P 500 on nearly every time frame.  Cyclicals are the first to go when traders get concerned so this stat is concerning.  Money Trend is pointing down somewhat. The Sum of 16-Indicators is in negative territory (-5 yesterday), but it improved to -4 today. Longer term they are improving. Smart Money (late-day action) was down on the day, but it remains flat longer term.  The Pros haven’t made up their minds so we must be somewhat concerned in the short-term.
I remain cautiously bullish, both short-term and longer term.
Recently (before today) the Financials (XLF) have been falling and my momentum rank hadn’t moved much. I looked back at some of the prior analysis and decided to use my older version of the Momentum System. Up until last week, the two versions were nearly identical.
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. Consumer Discretionary (XLY), XLF, IBB, XLV, & ITA are all close enough to be tied.
(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
- 2x S&P 500 ETF (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 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). 
Friday, Sentiment, 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.