Monday, April 3, 2017

ISM Index … Construction Spending … Auto Sales … Stock Market Analysis … Trading ETFs and ETF Ranking

ISM (MarketWatch)
“A resurgence among American manufacturers that began last fall and picked up after the election of Donald Trump carried on in March, with employment rising to the highest level in six years, according to a survey of executives. The Institute for Supply Management said its manufacturing index fell slightly to 57.2% last month…” Story at…
“U.S. developers ramped up construction spending in February to the largest amount in nearly 11 years, led by more building of homes, highways and schools.
Construction spending rose 0.8 percent in February.” Story at…

AUTO SALES (Reuters)
"Major U.S. automakers on Monday posted sales figures for March that came in below market expectations and heightened concerns America's long, robust boom cycle for car sales may finally be losing steam, pushing car companies' shares down. General Motors Co (GM.N) and Fiat Chrysler Automobiles NV (FCHA.MI) (FCAU.N) shares both fell almost 4 percent, while Ford Motor Co (F.N) was off 3 percent.” Story at…
-Monday the S&P 500 was down about 0.2% to 2359.
-VIX rose about 0.1% to 12.38
-The yield on the 10-year Treasury slipped to 2.336%.
The S&P 500 dipped to within a couple of points of the 50-day moving average (50-dMA) around noon and moved up from there all afternoon. That’s good to see especially since the Index fell hard Friday in the last half hour.  That was followed by after-hours selling Friday and some initial bearish Futures numbers.  The futures turned around Monday morning (early) and the Index held up reasonably well today, i.e. no major selling. We still may see another test of the 50-day at a close and we’ll just have to evaluate it if it happens.  For now, I think a bullish stance remains justified, but signals are not very strong. It looks like traders are waiting for the direction to become more apparent.
I remain cautiously bullish, both short-term and longer term.
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. Consumer Discretionary (XLY)
3. A number of ETFs are pretty close for the 3rd position.
(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). 
Monday, the Price indicator is positive; Sentiment, 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.