Monday, June 26, 2017

Durable Goods Orders … … Market Analysis … Trading ETFs and ETF Ranking

He who lives by the crystal ball will eat a lot of broken glass. – Lawrence Tribe. (But he is probably not the first to say something similar.)
“Orders for durable goods such as planes and computers fell in May for the second month in a row and registered the biggest drop in six months, suggesting that an early-year surge has faded. Durable-goods orders slipped 1.1% last month following a similar decline in April…” Story at…
-Monday the S&P 500 was up about 1pt to 2439.
-VIX was down about 2% to 9.84. (That’s ridiculous low volatility and is actually a concern for the future.)
-The yield on the 10-year Treasury slipped to 2.14%.
Bollinger Bands are now in a squeeze.  This just means that the moves in the S&P 500 have been exceptionally small and this suggests trouble.  This mirrors my calm-before-the-storm indicator. This type of limited up and down movement doesn’t last forever.  VIX fell below 10 again.  We’re likely to see a pullback of at least a couple percent, but I must point out that Bollinger Bands suggest a move, but don’t indicate which direction. I think the move will be down, but indicators are in flux so this is not a given. RSI is neutral. Smart Money (lat-day-action) is down so the Pros aren’t being too optimistic.
Short-term I am watching – it still looks like a small pullback is likely, but certainly not guaranteed. Long term, I’m cautiously bullish; I will worry more in 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…
Today Biotechnology (IBB) was again ranked #1 followed by Health Care (XLV). Clearly, the market is now betting that Obamacare will remain, either as is or with a new name. IBB and XLV could be subject to big swings depending on the healthcare vote. I couldn’t bring myself to buy today due to the Bollinger Band squeeze.
Utilities, XLU, is still beating the S&P 500. Strong Utilities often means trouble.
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.
I am still not bullish enough to take a long position in the trading portfolio.
-“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 switched to 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, Price is positive; Volume, Sentiment & VIX indicators were neutral. (With VIX recently below 10 for a couple of days (May and June), 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.