Monday, May 22, 2017

Bullish Short-Term Call (Raymond James) … Market Analysis … Trading ETFs and ETF Ranking

BULLISH SET UP (Raymond James)
Chart and discussion at…
-Monday the S&P 500 rose about 0.5% to 2394.
-VIX dropped about 9% to 10.93 at the close.
-The yield on the 10-year Treasury rose to 2.255%.
Volume was about 15% below the monthly average.  That’s fairly common when investors aren’t sure about market direction.
There were some good bull signs today:
-My sum of 17-indicators was +2 vs. -4 Friday. That’s a good improvement and the 10-day value was flat.
-There was late-day buying today so maybe the Pros are getting more constructive.
Over a 20-day smoothed basis the “Smart Money” (late-day-action) is now moving up.
-On a 10-day basis breadth continues to improve.
I wrote Friday that “…on a long-term basis, the trend is still UP.” Now it appears that that is true on a short term basis too; but today was the third day up in a row, so it’s possible we could see some profit taking Tuesday. 
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…
Technology (XLK) is No 1. I continue to hold the XLK. (In a downturn XLK and IWM would probably be among the poorer performers.) I would avoid XLE; its 120-day moving average is falling.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
Long is the favored trade going forward – 5/22/2017.
-“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.
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). 
Monday, Price is positive; Sentiment, Volume & VIX indicators were neutral. (With VIX recently below 10, VIX may be prone to incorrect signals. Usually, a rising VIX is a bad market sign; now it may just signal normalization of VIX, i.e., VIX and the Index may both rise. As an indicator, VIX is out of the picture for a while.)
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, but I consider it fully invested.
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.