Thursday, May 11, 2017

Producer Price Index … Jobless Claims … James Comey Got Fired … 60% Chance of Impeachment … Market Analysis … Trading ETFs and ETF Ranking

“U.S. producer prices rebounded more than expected in April amid rising costs for goods and services, leading to the biggest annual gain in five years in a sign that inflation pressures were rising. The Labor Department said on Thursday its producer price index for final demand increased 0.5 percent last month…” Story at…
“New applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans on unemployment rolls hit a 28-1/2-year low, pointing to a rapidly tightening labor market that could encourage the Federal Reserve to raise interest rates in June. Initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 236,000 for the week ended May 6…” Story at…
Finger-pointing continues that former FBI Director Comey’s handling of the Clinton investigation cost Hillary the election; but that’s not it. The reason Hillary Clinton lost is simple and can be stated in 3-words – Gary Johnson collapsed. In July, 13% of the voting public told pollsters they would vote for him. By Election Day, the number had dropped to 7%. Governor Gary Johnson (Libertarian candidate for President in case you’ve forgotten) was interviewed on CNBC the morning of the election and the anchors were congratulating him for getting more than 5% of the vote thus insuring Libertarians would have Federal funding for the next election…except that it didn’t work out that way.
Voters bailed on Johnson.  His gaffs over Aleppo (capitol of Syria) and other problems made voters leave him. No Libertarian leaning voter would vote with the Democrats that gave Trump a late boost. Johnson actually garnered about 2% of the votes, so Trump was the recipient of a last minute 5% swing in his favor.  Sorry Hillary, it wasn’t Comey – it was Johnson.
Now the question is: What was the real reason James Comey was fired?
60% ODDS OF IMPEACHMENT (Independent News UK)
Donald Trump's firing of FBI director James Comey has seen the odds on his impeachment slashed to their shortest ever price. Bookmaker Paddy Power said its odds reflected a 60 per cent chance of the billionaire being impeached during his first term in office.” Story at…
-Thursday the S&P 500 fell about 0.2% to 2394.
-VIX rose about 4% to 10.60 at the close.
-The yield on the 10-year Treasury slipped to 2.389%.  
Bear signs:
-RSI is back up to 79. (80 is “overbought.)
-The percentage-of-stocks-advancing over the past 10-days dropped to 48.8% today; that means that most stocks on the NYSE have gone down in the last 10-days.
-Market Internals remained negative today.
-Advancing volume (smoothed 10-day value) is falling.
-My Sum of 17–indicators was little changed on the day, but the 10-day value is still headed sharply down.
-New-high/new-low data is bearish.
Better signs:
One of the few bullish indicators I follow is late-day action. 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.
I am neutral short-term and cautiously bullish long term. That short-term neutral may change soon depending on market action.
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.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
No positions. I would take profits on long positions now and watch the market for confirmation, either direction.
Market Internals remain negative 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 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.