HUSSMAN COMMENTARY (Hussman Funds)
“In recent months, the consensus of survey-based economic
measures has turned higher, including a variety of surveys of purchasing
managers, as well as indices compiled by regional Federal Reserve banks. At the
same time, economic measures based on actual activity such real GDP, real
sales, consumption, and employment haven’t been nearly as robust, and in some
cases have turned lower. This disparity between “hard” activity-based and
“soft” survey-based measures has been particularly wide relative to historical
norms… Given the deterioration in correlations between “soft” survey-based
economic measures and subsequent economic and financial outcomes, investors
should be placing a premium on measures that are reliably informative. On that
front, hard economic data, labor force constraints, factors influencing
productivity (particularly gross domestic investment and the position of the
current account balance in the economic cycle), reliable valuation measures,
and market internals should be high on that list.” John Hussman, Phd.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 rose about 0.1% to 2357.
-VIX rose about 9% to 14.05 at the close.
-The yield on the 10-year Treasury slipped to 2.367%.
We had oddly bullish stats Monday: Up-volume was nearly
twice down-volume; Advancers outpaced decliners by more than 2 to 1; and
New-highs outpaced new-lows 94 to 10. Usually, stats like those would bring an
up-day of much more than 2pts. Indeed, small and mid-cap stocks did well
Monday. Still, many seem to be wary of this market.
If I had to put a brand on today’s market I’d call it:
“The Pros Don’t Believe It.” There’s plenty of evidence:
(1) Late day selling. The S&P 500 sold off hard again
suggesting Pros are selling.
(2) Rising VIX. The Options Boys think all is not well
with the market.
(3) Low volume overall. Volume was nearly 20% below the
monthly average Monday – that’s very low and one must wonder whether this is a
case of buyers sitting out. If Buying dries up, there’s trouble ahead.
(4) Bonds rose forcing yields down. The Bond Ghouls seem
concerned.
There was an indicator popularized by Don Hayes that
looked at the difference in morning trading (dumb-money) vs. last hour trading
(smart money). The problem is that it
has a long lead time and that can be a bit too loose for the average
trader. I bring this up just to point
out that late day trading can be a good tell on the market, because that’s
where the Smart Money trades. It is not unusual to see 40 to 50% of the total
volume traded in the final hour. Late-day trading is reversing down so we must
be concerned.
The Index is 0.4% above its 200-dMA. There is a break coming. The old Advance
Decline Ratio is overbought. RSI is 60 (high but not a sell signal yet). The likely
direction of a break would seem to be down, but it’s not a slam dunk. My Sum of 16-Indicators is pretty close to
neutral at +2; this indicates more of the same. Repeating: The market
tug-of-war continues with mixed indicators and a chart that hasn’t yet resolved
itself – are we going up or down? It looks like we will have a longer wait.”
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…
1. Technology Select Sector SPDR ETF (XLK) remains the
top ranked ETF.
(I took positions in XLF and XLK Wednesday, 29 March.) My
guess is that XLF will rebound after a correction as the interest rates rise.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
No positions.
Until the market makes a decision (up or down) there is no point in guessing. Indicators remain mixed.
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals
switched to 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, the Price indicator is positive; Sentiment,
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.
