Wednesday, May 31, 2017

Chicago PMI … Home Sales … Fed Beige Book … Market Analysis … Trading ETFs and ETF Ranking

CHICAGO PMI (MarketWatch)
“A measure of how well the economy is performing in the Chicago area rose in May to the highest level in 2½ years, showing the economy remains quite healthy in key regions of the U.S. The Chicago business barometer, or Chicago PMI, rose to 59.4 in May…” Story at…
“Americans retreated from signing contracts to buy homes in April for the second straight month, a possible sign that a declining number of homes on the market are stifling sales during the traditional spring buying season. The National Association of Realtors said Wednesday that its pending home sales index fell 1.3 percent in April …”
FED BEIGE BOOK (Fox Business)
“Economic growth has softened in some areas of the U.S. and a number of firms have become somewhat less optimistic about the future, according to a new report from the Federal Reserve. ‘A majority of districts reported that firms expressed positive near-term outlooks; however, optimism waned somewhat in a few districts,’ the Fed said Wednesday…”
-Wednesday the S&P 500 dropped about 1pt to 2412.
-VIX rose about 0.3% to 10.41.
-The yield on the 10-year Treasury slipped to 2.2o5%.
Volume was 25% above normal.  We also saw little change in price. Some would suggest that this is “distribution,” smart money selling to the dumb money.  I’ve seen other opinions that high volume with little change in price validates the price. Perhaps, but do the sellers know something we don’t? Late day action was fairly positive with a decent upward price rise from about 3:15 to the close.  That suggests the Pros are positive on the market, so that’s a good sign. Longer term, the smoothed view of late day action is flat - neither positive nor negative.  
The Index is still pushing the upper Bollinger Band and that suggests some down time ahead. The Sum of 17 indicators was unchanged at -2. On a 10-day basis the Indicators are relatively flat. Bottom line signals are not real strong. Overall the Index has again stalled in the vicinity of 2400 and we’ll just have to wait.
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
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 would avoid XLE; its 120-day moving average is falling.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
Neutral with no positions recommended. - 5/24/2017 thru present.
-“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.
-“Commandment #1: “Thou Shall Not Trade Against the Trend.” - James P. Arthur Huprich
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). 
Wednesday, Price, 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 for my situation.
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.