Tuesday, April 11, 2017

Job Openings (JOLTS) … Bull Case … Correction Coming … Stock Market Analysis … Trading ETFs and ETF Ranking

U.S. employers posted more open positions in February, but the number of people getting hired and the number quitting jobs fell. The overall figures suggest that the job market remains healthy…” Story at…
"The end of the cycle is often the best," he [Morgan Stanley's Michael Wilson] added. "Think 1999 or 2006-07. In a low-return world, investors cannot afford to miss it."...Wilson has laid out a "bull case" for stocks that calls for the S&P 500 index to reach 3,000 points within 12 months, representing a gain of almost 30 percent. 
…or the bear case below…
“Trader Kenny Polcari, director at O'Neil Securities, said stocks have been resilient lately but may be headed for a correction…."It's a seasonality thing. If you look back the last four or five years, after tax day the market kind of pulls itself back, corrects a little bit, churns before it starts to move again," Polcari told "Closing Bell." Story at…
-Tuesday the S&P 500 dipped about 0.1% to 2354.
-VIX rose about 7% to 15.07 at the close.
-The yield on the 10-year Treasury slipped to 2.297%.
Let’s call today’s market, “David and Goliath: Goliath loses again.” The S&P 500 is slowly falling, but the rest of the market remains in better shape.  The big winner today was the S&P Small Cap 600 followed by the Russel 2000 and the Mid Cap 400.  The small caps were clearly killing the big boys. (The Dow was down too.) Usually, the small caps lead after a bottom so one wonders whether the predicted correction has been cancelled. I’d say the jury is still out.
From Barrons
“Changes big and small are afoot, with an emphasis on small for the moment. Finally, small-cap stocks are getting their day in the sun. After years of being overshadowed by large multinational companies, smaller companies will, over the next 12 months, be the biggest beneficiaries of the economic climate and the policies topping President Donald Trump’s agenda, wealth managers say.” Story at…
The Index is 0.2% above its 50-dMA. (I had a typo yesterday because I incorrectly noted the Index was 0.4% above its 200-dMA.) If the Index breaks its 50-dMA it is likely to retest the prior low of 2142. The 50-dMA will be the first test. We’ll need to keep waiting.
My Sum of 16 Indicators dropped from +2 to -5. That’s not a great sign in the short run.
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.
Market Internals switched to 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). 
Tuesday, the Price indicator was positive; VIX indicator was negative; Sentiment & Volume 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 50-dMA.
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.