Thursday, May 25, 2017

Jobless Claims … Market Analysis … Trading ETFs and ETF Ranking

"The number of Americans filing for unemployment benefits rose slightly last week and the four-week moving average of claims hit a 44-year low, suggesting a further tightening of the labor market that could encourage the Federal Reserve to raise interest rates next month.” Story at…
-Thursday the S&P 500 rose about 0.4% to 2415. (Another new-high.)
-VIX dropped about 0.3% to 9.99.
-The yield on the 10-year Treasury rose to 2.257%.
-VIX has again fallen below 10. VIX is lower than it has been in the last 5-years, except for a couple of days this month. With the S&P 500 within a couple of points of its upper Bollinger band, it sure looks like a move down (even if it is only a couple of percent) is overdue. Today was the 6th positive day in a row.
Still, most signs are bullish:
-My sum of 17-indicators was +3 today vs. -1 yesterday and longer term it continues to improve.
-The S&P 500 made a new high today. Unlike yesterday, the breadth of the market (those stocks that are advancing) was a lot better today with 8% of stocks on the NYSE making 52-week highs today. That’s not a great number, but it’s better than it has been recently.
-Traders in the Rydex funds I track are betting against the trend because of the number of consecutive days UP. Sentiment has collapsed recently as the 5-dMA of %-bulls dropped below 70%. It was 82% just 2-weeks ago. Sentiment suggests that there may be room for further advance. New-highs have picked up nicely too and Holidays have a positive bias along with end of month and the first few days of a month…Those pesky Bollinger Bands are the party poopers…and advancing volume is falling over the last 10-days, but not drastically.
I’d look for a huuuge move up before I’d consider shorting. There should be a bit of a breather soon, but this market can still go higher.
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). 
Thursday, 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.