Thursday, April 20, 2017

Jobless Claims … Philadelphia Fed … Leading Economic Indicators … Stock Market Analysis … Trading ETFs and ETF Ranking

JOBLESS CLAIMS (Business Insider)
“Initial jobless claims, which count the number of people who applied for unemployment insurance for the first time, rose by more than expected. The claims increased by 10,000 to 244,000 in the past week…” Story at…
My cmt: The “more than expected” rise was by less than 2%, so this wasn’t much of a miss.
PHILLY FED (MarketWatch)
“The manufacturing index from the Philadelphia Fed slid in April, but from high levels, suggesting slower growth in the factory sector after a postelection surge. The index fell to 22.0 from 32.8.” Story at…
LEI (FoxBusiness)
“The Conference Board's leading economic index rose 0.4%, to 126.7, last month, after increasing 0.5% in February and 0.6% in January.” Story at…
There is a Fed meeting in 2-weeks (2-3 May) and I wouldn’t be surprised to see some big moves around the meeting.
-Thursday the S&P 500 rose about 0.8% to 2356. 
-VIX fell about 5% to 14.15 at the close.
-The yield on the 10-year Treasury rose to 2.241%.
The S&P 500 closed above the red down-trend line I have referenced for a few days and closed an eyelash below the 50-dMA so we should be thinking more like bulls. For a trend break the general rule is the trend would be broken when the Index closes above the downtrend line on 2 consecutive days or closes 3% above the line. Let’s see if it can close higher Friday. A higher close and I’ll have to be in the bull camp.
Unfortunately, there are bearish signs too:
-Thursday was a statistically significant up-day (based on statistical analysis of daily market volatility) and that is followed by a down-day about 62% of the time. 
-My Calm-before-the-storm indicator is the most bearish since last September when it signaled a 5% drop. Before that one needs to go all the way back to 2014 for a comparable number when it signaled a 7% drop.
-Smart money is still headed down. That’s based on late day action. This is a big deal.  The Pros are not showing confidence in the markets right now.  
As far as a near-term correction, the jury is still out.  The Index is only down 1.7% from its prior high although it has been 6-weeks since the markets made new highs. I'm leaning "Bear" but I have been wrong a lot on short-term calls recently.
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.
1. Technology (XLK) retook the lead. Utilities Select Sector SPDR ETF (XLU) moved to second.

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 quickly (or already) so these positions will not be held long if the market closes above the upper downtrend line.
Market Internals turned Bullish 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). 
Thursday, Sentiment was negative; Price was positive; 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..
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.