Wednesday, June 7, 2017

Crude Inventories … Market Analysis … Trading ETFs and ETF Ranking

“Oil prices slid more than 3 percent on Wednesday after the U.S. government reported an unexpected increase in inventories of crude and gasoline, fanning fears that output cuts by major world oil producers have not drained the global crude glut very much. Crude stocks in the United States grew 3.3 million barrels to 513 million barrels, according to the U.S. Energy Information Administration (EIA).” Story at…
-Wednesday the S&P 500 rose about 0.2% to 2433.
-VIX dipped about 1% to 10.39.
-The yield on the 10-year Treasury rose to 2.176%.
RSI popped up to 87 and is now overbought so RSI suggests trouble for the markets.
Reviewing RSI (Simple Moving Average, 14-day):
Relative Strength measures the size of up-moves vs. all-moves on a 14-day moving average basis and presents the result as a percentile. For example if the RSI is 85, it means that the size of up-moves are in the 85th percentile when compared to all moves over the 14-day period.  If ALL moves had been up, RSI would be 100 – a definite short term sell indicator. For my purposes, 30 is oversold (suggesting a turn-around to the upside) and 80 is overbought. If the up-moves and down-moves are equal in size over the 14-day period, RSI would be 50.
New-High/New-low data is slipping, a bearish sign.  Breadth (10-dMA of the %-of advancing stocks) is falling, but it is still above 50% at 52.2%. In plain English it shows that over the last 10-days 52% of stocks on the NYSE have gone up, so need to panic.  
Market Internals remained neutral on the market and the Sum of 17-Indicators was neutral on the day and is still pointing up on a smoothed basis.
Repeating prior notes: Overall, I think the short-term performance is somewhat limited; markets can go higher, but perhaps not too much higher before we move back at least a couple percent. Longer term, I remain cautiously bullish; I may worry late-summer and into early fall.
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
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) remains No 1. I would avoid XLE; its 120-day moving average is falling.  Utilities are 2nd and that suggests investors are looking for some safety.
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). 
Wednesday, Price, Volume, Sentiment & 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.
The previous signal was a BUY on 2 June and the last actionable signal was a BUY (from a prior sell) on 15 November 2016.