Thursday, June 15, 2017

FOMC Rate Decision … Retail Sales … Consumer Price Index … Market Analysis … Trading ETFs and ETF Ranking

Time for a new laptop; this one is becoming a pain to keep going.
“The Federal Reserve approved its second rate hike of 2017 even amid expectations that inflation is running well below the central bank's target…Federal Open Market Committee increased its benchmark target a quarter point. The new range will be 1 percent to 1.25 percent for a rate that currently is 0.91 percent.” Story at…
“U.S. consumer prices unexpectedly fell in May and retail sales recorded their biggest drop in 16 months, suggesting a softening in domestic demand that could limit the Federal Reserve's ability to continue raising interest rates this year.” Story at…
-Wednesday the S&P 500 slipped about 0.1% to 2437.
-VIX rose about 2% to 10.64.
-The yield on the 10-year Treasury rose to 2.135%.
There was a new-high Tuesday but only 4.1% of stocks on the NYSE made a 52-week new high.  That’s a weak number that reflects the narrow advance of this market. There aren’t enough stocks participating. Nothing new here though, this has been typical for this advance for several years. That’s one reason I was previously bearish. It turns out that while this stat shows that the market is not healthy, it is not a good topping indicator.
The Advance Decline Ratio is signaling “overbought”.  The sum of 17 indicators remains in positive territory and Money trend is bullish too. Late day action (the Smart Money) is headed down and that’s bearish - lots of mixed signals. I remain unimpressed on a short-term basis.
Longer term, I remain 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…
Technology (XLK) remains No. 1, but a number of the ETFs are close.  This tends to happen during corrections; investors get confused and the ETFs flatten out as leadership fails.  I am not calling a correction here; but the ETF ranking system is hinting at problems.
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 remain 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). 
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.