Monday, May 1, 2017

Personal Spending … PCE Prices … Construction Spending … ISM Index … Unsound Finance … This Isn’t the 1980’s … Market Analysis … Trading ETFs and ETF Ranking

“U.S. consumer spending stalled in March while inflation slowed to below the Federal Reserve’s target, showing the biggest part of the economy might take more time to gain momentum after a tepid start to the year.” Story at…
PCE PRICES (Economic Calendar)
“The US Personal Consumption Expenditure (PCE) price index declined 0.2% for March…The year-on-year rate declined to 1.8% from 2.1% and compared with an expected rate of 1.9%.” Story at…
My cmt: This stat is an important one that the FED uses to measure inflation. FED officials are on-record saying the current US economic slowdown will be transitory and should improve.
“U.S. construction spending unexpectedly fell in March from a record high amid a pause in private construction investment after five straight months of increases.
The Commerce Department said on Monday construction spending slipped 0.2 percent.” Story at…
ISM INDEX ((MarketWatch)
“U.S. manufacturers scaled back hiring plans in April and demand for new products abated, but most companies said business was still quite brisk, a survey of executives found. The Institute for Supply Management said its manufacturing index slipped to 54.8% in April from 57.2%.” Story at…
“It's not difficult to present analysis showing 3% (why not 4 or 5%?) growth creating ample revenues to offset major tax cuts. But after eight years of egregious monetary stimulus, one can easily envisage a scenario where growth surprises to the downside. And it's not a totally crazy notion to ponder growth faltering concurrent with a rise in Treasury borrowing costs. Such a scenario would likely see a bursting of assets Bubbles and a resulting collapse in revenues throughout the government sector. There's as well all the entitlements and unfunded pension plans. When things turn sour globally, we'll be spending a lot more on national defense. Unsound Finance always comes back to bite. The worrying part is that the world has never experienced anything comparable to the past 30 years.” – Doug Noland. Commentary at…
“…this isn’t the 1980’s, the last time tax reform was passed, with low valuations, high inflation and interest rates and much stronger economic growth to start with. Therefore, the impact of tax cuts will likely be far less than expected. Secondly, tax reform is likely going to be the single most difficult challenge of this Administration as “partisan politics” come into play. Ultimately, tax reform could be far different, and much less robust, than currently anticipated.
So, here we are at the end of the first 100-days, with little progress being made toward the things that count the most with investors. With asset prices currently priced for perfection, the real risk is that of “disappointment.” It will likely pay to “err to the side of caution” for now as the risk is clearly tilted against reward for now.” – Lance Roberts. Commentary at…
-Monday the S&P 500 was up about 0.2% to 2388. 
-VIX dropped about 7% to 10.11 at the close.
-The yield on the 10-year Treasury rose to 2.322%.  
Mostly bullish signs continue:
-My Sum of 16-Indicators was at +9 today vs. +8 yesterday. Longer term the indicators continue to improve. Market Internals look good and new-high/new-low data remains bullish, but just barely.
-Money Trend is still moving up, but just barely. That’s still bullish though.
The Late-day action (Smart Money) was down today, but it is trending higher. That’s mildly bullish.
Bear Signs:
-Sentiment remains high and has now resumed its slow rise. Currently it is not a sell signal and is giving a neutral sign.
I remain bullish short-term and cautiously bullish longer term.
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…
No1 is Technology (XLK).
Here’s a sector run-down from MarketWatch…
Chart from…
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
No positions.
I was shellacked in recent trades so no short-term trading for a while.  Long is the call now though, as it has been since the Index closed above the 50-dMA.
Market Internals are positive 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, Sentiment was negative; Price was positive; Volume & VIX indicators were neutral.
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.
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.