Friday, May 26, 2017

Durable Goods … GDP – 2nd Estimate … Michigan Sentiment (Final) … Market Analysis … Trading ETFs and ETF Ranking

Orders for long-lasting goods such as planes and appliances fell in April for the first time in five months, suggesting that a resurgent U.S. manufacturing industry is still expanding but at a somewhat slower pace. Durable-goods orders dropped 0.7% last month…” Story at…
GDP (Marketwatch)
“Turns out the U.S. economy wasn’t totally asleep in the first three months of 2017: the government raised the growth rate to 1.2% from its original 0.7% reading.
Even that brief economic chill already appears to be a fading as the economy picks up…” Story at…
“Consumers remain largely confident about the economy, even as a sharp political divide among respondents continues, according to a report Friday.
The University of Michigan said its final reading of consumer sentiment was 97.1 in May…” Story at…
-Friday the S&P 500 rose a point to 2416. (Another new-high.)
-VIX dropped about 2% to 9.81.
-The yield on the 10-year Treasury slipped to 2.247%.
-VIX remains below 10. VIX is lower than it has been in the last 5-years, except for a couple of days this month. Actually, it seems like the last time VIX was consistently below 10 was before the last major crash.  Not immediately before, but maybe a year or so before the crash. I’ll have to look back and check the details.  The short story is the extreme low VIX signals too much complacency and trouble further off.  A near-term correction is always possible, but VIX has been low for a long time, so perhaps it’s not a good correction signal now.
Holiday volume was low Friday, about 20% below the monthly average, so it’s hard to get too excited about indicators. Signals were little changed today, but I am feeling less bullish. My guess is that the S&P 500 will find it hard to get much higher in the near-term. This uninterrupted rise may take a while to work off. Perhaps it’s time to “go-way” in late May, but only for short-term money. All of the long-term signals remain neutral suggesting the slow advance may continue, with a few fits and starts along the way.
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). 
Friday, 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.