“New-home construction in the U.S. cooled in March to a
four-month low as starts of single-family properties settled back from the
strongest pace in almost a decade, Commerce Department data showed
Tuesday…there’s evidence of a strong outlook for the housing industry as
homebuilder sentiment holds near the strongest level in more than a decade…”
Story at
INDUSTRIAL PRODUCTION (MarketWatch)
“Manufacturing output lost momentum in March, dragged
down by weakness in the auto sector, according to Federal Reserve data released
Tuesday. Factory output fell 0.4%, the first decline since last
August…” Story at…
My cmt: Including Utilities output (as is normal for this
stat) Industrial Production rose. It seems odd to include Utilities output (the
result of cold weather) in the Industrial Production data, but that’s what they
do.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 dipped about 0.3% to 2342.
-VIX dropped about 2% to 14.42 at the close.
-The yield on the 10-year Treasury dropped to 2.176%.
(Bond investors are concerned. That’s the lowest yield since November.)
SENTIMENT. In addition to bearish issues noted in recent
blog posts, Sentiment has once again reached extreme levels, currently at
81%-Bulls. I measure Sentiment as %-Bulls (Bulls/{bulls+bears}) based on the
amounts invested in selected Rydex/Guggenheim mutual funds. On a standard
deviation basis, that value matches extremes seen during the dot.com crash. It
also reached similar extreme levels back in May-June 2015 after the Top that
preceded a 12% correction. Sentiment tends to peak after a top as dip buyers
move in. This isn’t by itself a great indicator since sentiment can remain
elevated for some time, but it’s another reminder that caution is warranted.
Extreme bullish sentiment is a contrarian indicator since the masses are
usually wrong.
VIX has also been rising so it is possible that the
long-term NTSM indicator will turn bearish soon. Based on economic data, a recession seems
unlikely in the near term, but it may still make sense to take some money off
the table to reduce risk should a sell signal occur (or sooner if risk tolerance
is low).
The 5-10-20 Timer has been “’sell” for about 2-weeks. It
is simplified timing system that issues a sell when the 5-dEMA (exponential
moving average) drops below the 10-dEMA and the 20-dEMA. An exponential moving
average weights the moving average more on recent price data rather than a
regular moving average that uses an equal weighting.
As far as a near-term correction, the jury is still
out. The Index is only down 2% although
it has been 6-weeks since the markets made new highs.
Overall I am still somewhat bearish. If the Index can
break above its upper descending trend-line, I’ll definitely reconsider.
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 iEFA and XLE their 120-dMAs are now
trending down. In my back testing it was apparent that during corrections
flight to safety meant that XLU tended to outperform. (XLU was the only ETF
that was up today, in the ones that I track.) The fact that XLU is
outperforming most ETFs is an indication that the Pros are positioning for a
correction. Another sign of market stress is that dispersion between ETFs drops
and leadership changes frequently. Rather than try to chase the hottest ETF, I
suggest exiting ETF trading positions, or just remaining with the recent
recommendations (XLK) for long-term investors.
1. Emerging Markets (SCHE) was the top ranked ETF. Utilities
Select Sector SPDR ETF (XLU) was second. (I am holding XLK.)
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
Rydex Inverse 2x Nasdaq 100. Established 4/13/2017.
VXX. Established 4/13/2017.
This pullback could
be over already so these positions will not be held long if the market closes
above the upper downtrend line.
TUESDAY MARKET INTERNALS (NYSE DATA)
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).
LONG TERM INDICATOR
Tuesday, Sentiment was sell; Price, Volume & VIX
indicators were neutral.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
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 50-dMA.
