Thursday, May 18, 2017

Jobless Claims … Philadelphia Fed … Leading Economic Indicators.. Market Analysis … Trading ETFs and ETF Ranking

“New applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans on unemployment rolls tumbled to a 28-1/2-year low, pointing to rapidly shrinking labor market slack….Initial claims for state unemployment benefits decreased 4,000 to a seasonally adjusted 232,000 for the week ended May 13…” Story at….
PHILLY FED (MarketWatch)
“Manufacturing in the Philadelphia region showed unexpected strength in May, according to data released Thursday, a sign that the factory sector could be on solid ground. The Philadelphia Fed said its manufacturing index jumped to a reading of 38.8 in May from 22 in April.” Story at…
LEI (Conference Board)
“The Conference Board Leading Economic Index® (LEI)for the U.S. increased 0.3 percent in April to 126.9 (2010 = 100), following a 0.3 percent increase in March, and a 0.5 percent increase in February. “The recent trend in the U.S. LEI, led by the positive outlook of consumers and financial markets, continues to point to a growing economy, perhaps even a cyclical pickup,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board.” Press release at…
“This year has been the least volatile since 1965.” That’s a little scary since a major Bear market began in 1966 and lasted until 1982.
-Thursday the S&P 500 rose about 0.4% to 2366.
-VIX dropped about 6% to 14.66 at the close.
-The yield on the 10-year Treasury rose to 2.231%.
There was no follow-thru down after yesterday’s selloff; but some of the day’s stats raised a cautionary flag. 51% of stocks on the NYSE were up today – that’s OK – but only 47% of the volume was up and new-lows (80) outpaced new-highs (39). Overall today’s numbers lean towards bearish. There was a lot of Late-day selling as the Index dropped about 10pts after 2:30pm so the Pros didn’t want to stay long today.
My sum of 17-indicators continued down and remains in negative territory. Most indicators are now pointing down. 
On a 10-day basis breadth did pick up a bit today and 50.1% of stocks have been up over the last 10-days.
Overall, it still seems like the bears may be in control, but as I noted yesterday, that doesn’t mean that there couldn’t be a quick turn-around and a move up (blowing my opinion on the bears).  A test of the recent low of 2329 would help us make a decision. We may have a better idea in a couple of days.
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) slipped to No 2 & the Schwab Emerging Market ETF (SCHE) moved into 1st place. Let’s wait a bit and see if it remains there.  There isn’t that much difference in momentum. XLK is outperforming the SCHE over the last 2-months on %-gained basis.  I continue to hold the XLK although I may take profits Friday. (In a downturn XLK and IWM would probably be among the poorer performers.) I would avoid XLE; its 120-day moving average is falling.
In general, odd things can happen to the ETFs during a correction; all turn equally bad as the markets decline.

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 good record in long positions.
Market Internals improved to Neutral on the market because 10-day Breadth popped above 50%..
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 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.