Tuesday, May 2, 2017

Auto sales … Exhaustion Gaps … Explosive Bull? … Be Bullish … Market Analysis … Trading ETFs and ETF Ranking

“U.S. auto sales fell 4.7 percent last month, the most pronounced slowdown of the year and a strong indication that 2017 will put an end to seven straight years of growth.” Story at…
“A gap is a point where the opening price on a given day is materially higher than the prior day’s closing level… when gaps occur after an extended advance, they are called “exhaustion gaps,” and they can signal desperation among investors to chase the prevailing trend… The chart below combines the S&P exhaustion gaps with those for the Dow Industrials. Given such simple criteria, the outcomes are rather disturbing.” – John Hussman, PhD.
Chart and commentary from John Hussman, PhD from Hussman Funds at…
My cmt: When I first saw the above chart I thought, “Uh oh! Here’s another “Crash Chart” that once again “proves” a crash is near…except that perhaps it doesn’t.  One of the criteria is that “SPX must be within 2% of a record high.” Maybe I’m wrong, but wouldn’t this chart be very similar if one plotted full moons within 2% of record highs? I guess I just don’t understand it, but it seems hard to believe that there has not been a single day from 2012 thru late 2016 that doesn’t have a 0.5% gap up near an all-time high. I am suspicious that the chart should be littered with false signals.
EXPLOSIVE BULL – IT IS THE 80’s! (MarketWatch)
“The market call I am making could be life-changing,” wrote Fahmy, managing director of New York-based investment firm Zor Capital. “The explosive bull market from 1995 to 2000 helped so many investors multiply their accounts many times over, and we could be heading into a similar period now.”Story at…
My cmt: Just yesterday I posted a commentary from Lance Roberts on this subject. His thesis was this period isn’t like the 1980’s and investors should be cautious.
BE BULLISH (Raymond James)
 “We continue to think the rally’s driver is earnings, since our belief is the equity markets have transitioned from an interest rate-driven to an earnings-driven secular bull market. Categorically, earnings were the driver last week with 68.1% of reporting companies beating the estimates and 66.0% bettering the revenue estimates (chart 1 on page 3). Importantly, the percentage of companies raising earnings guidance, versus companies lowering guidance, has flipped positive for the first time in the last three quarters (chart 2 on page 3). Be bullish my friends, be bullish!” – Jeffery Saut. Commentary at…
-Tuesday the S&P 500 was up about 0.1% to 2391. 
-VIX rose about 5% to 10.59 at the close.
-The yield on the 10-year Treasury slipped to 2.282%.  
I track high-volume days as a way of following trend changes. These are days when 90% of the volume is up; or on the other side, 90% of the volume is down. The last 90% down volume day was 21 Dec 2016.  The last high up-volume day was the day after the bottom (5% pullback) on 4 Nov 2016. This is another indication of an abnormally quiet market. Long periods without a high up or down volume day tend to generally indicate tops – not necessarily major tops. Bottom line: It would be nice to see a high up-volume day to confirm this uptrend. 
Not much is new…Mostly bullish signs continue:
-My Sum of 16-Indicators was at +9 today vs. +9 yesterday. Longer term the indicators continue to improve. Market Internals look good and new-high/new-low data remains bullish, but just barely.
-Money Trend is still moving up.
-The Late-day action (Smart Money) was up today and it continues to trend higher. That’s mildly bullish.
Sentiment has slipped to a neutral position.
I remain bullish short-term and cautiously bullish 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…
No1 is Technology (XLK).
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
No positions.
I was shellacked in recent trades so no short-term trading for a while.  Long is the call now though, as it has been since the Index closed above the 50-dMA.
Market Internals are 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). 
Tuesday, Price was 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.
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.