Monday, May 15, 2017

Empire Manufacturing … Pullback in S&P 500 … Scary Markets Coming … Market Analysis … Trading ETFs and ETF Ranking

“Manufacturing activity in the New York region declined in May as the New York Federal Reserve’s gauge of current business conditions in the area hit negative territory for the first time since October. The index fell six points this month to -1 from 5.2 in April…” Story at…
PULLBACK IN S&P 500 (MarketWatch)
“As I review my charts, much still points to the potential we have been following that the S&P 500 Index could fall toward the 2,330 region, and ideally to around 2,285.
As I write this, the stock market has presented us with a setup to take us there in the upcoming week.” - Avi Gilburt, Elliott Wave technical analyst. Commentary at…
“Big picture, the near term looks good and the longer term looks scary. That is because…The economy is now at or near its best, and we see no major economic risks on the horizon for the next year or two…we fear that whatever the magnitude of the downturn that eventually comes, whenever it eventually comes, it will likely produce much greater social and political conflict than currently exists.” – Ray Dalio, Bridgewater Hedge Fund. Blog available at…
-Monday the S&P 500 rose about 0.5% to 2402.
-VIX creeped up about 0.2% to 10.42 at the close. (The options boys aren’t worried.)
-The yield on the 10-year Treasury rose to 2.346%.
While the 2-articles linked above are bearish, it’s not clear to me; the yo-yo continues.  We’ve had up and down moves for about 2-weeks. Monday the S&P 500 broke slightly higher than its 2-weeks-ago value and made a new high. Internals improved too. If we can get some follow-thru it might give us more confidence that the Index will leave 2400 in the dust.  As it is, we may have to wait further to decide whether there is going to be additional gains from here. The Index hasn’t gone up much since 26 April (3-weeks ago) when it was 2388.
Bear signs:
-New-high/new-low data is mildly bearish.
-My Sum of 17–indicators improved from -1 to +3 on the day, but the 10-day value is still headed sharply down.
Neutral signs:
-Market Internals remained neutral today.
Bull signs:
-Money Trend switched to the upside.
-RSI was 63 so maybe the Index has gotten past the overbought signal from 5-days ago.
-The percentage-of-stocks-advancing over the past 10-days rose to 51.1% today; that means that most stocks on the NYSE have gone up in the last 10-days.
-The 5-10-20 Timer System remains “buy”. (The 5-dEMA & 10-dEMA are both above the 20-dEMA.)
-Late-day action was up today and it is headed up on a smoothed 20-day basis. I place a high value on late-day action since it usually indicates what the Pros think.  Apparently, they think this market can go higher.
Overall, indicators are neutral to bullish.  Let’s see if we can see some acceleration – one way or the other.
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 XLE; its 120-day moving average is falling.
No.1 remains Technology (XLK). I continue to hold the XLK.
“At each major market peak throughout history, there has always been something that became “the” subject of speculative investment. Rather it was railroads, real estate, emerging markets, technology stocks or tulip bulbs, the end result was always the same as the rush to get into those markets also led to the rush to get out. Today, the rush to buy “ETF’s” has clearly taken that mantle…” – Lance Roberts. Commentary at…
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
No positions. Let’s watch the market for confirmation, up or down.
-“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.
I haven’t done well in my short positions over the past 6-months; conversely, I have a decent record in long positions.
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). 
Monday, Price was 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.