Monday, June 12, 2017
Food Stamps at Record Levels … Un-Constitutional Funding of Obamacare … Market Analysis … Trading ETFs and ETF Ranking
Today’s Blog may sound more like political propaganda, but many political issues have significant economic consequences.
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.
FOOD STAMPS AND UNEMPLOYMENT
It’s odd that we have very low unemployment now, but very high numbers of people on subsistence. Here’s a clip from “Matt Trivisonno’s Blog”…
“…we have been offshoring jobs [and] we have been following a policy of mass immigration, bringing in about 1 million legal immigrants per year. It is painfully obvious that our economy has not been able to generate enough jobs for this massive increase in population, and widespread poverty is the result…In August of 2016, WikiLeaks released hacked emails from billionaire George Soros where he gave marching orders to President Obama to admit more migrants to the USA (among other things).” Charts and Commentary at…
My cmt: …but unemployment is low so why food stamps? My guess would be the jobs held by immigrants and others who have lost manufacturing jobs are low paying. A family of 4 with income below $31,596 qualifies for Food Stamps. A single person must make below $15,444 to qualify. Each person on Food Stamps receives about $125 per month. The program cost $71-billion last year or about $650 per taxpayer.
OBAMACARE IS BEING FUNDED UNCONSTITUTIONALLY (LA Times, 12 May 2016)
“…a federal judge declared the Obama administration was unconstitutionally spending money to subsidize health insurers without obtaining an appropriation from Congress.” Story at…
RULE OF LAW APPLIES TO DEMOCRATS TOO (Bloomberg, 23 May 2017)
“…the Patient Protection and Affordable Care Act also granted subsidies to go to the insurers to cover the cost. Well, to be precise, lawmakers who dreamed up Obamacare promised the payments to insurers, but did not appropriate any money to actually pay them.” Story at…
My cmt: I am not making a point that Obamacare is good or bad – I am troubled that once again, our politicians hold themselves above the law.
When I was in Government, I ran a 20-million dollar program (small by Gov’t standards) having to do with operation and maintenance and including some construction projects. I learned that there is a spending principle in Government that is absolutely sacrosanct - before the Government can spend a dime, 2-bills must be passed: (1) An Authorization bill that authorizes the effort (2) an Appropriation Bill to provide the funds. Absent these two bills, any expenditure would be illegal and un-Constitutional. In my experience, occasionally an illegal expenditure might occur by mistake if a contractor was directed to perform work before funds were obligated or if a contractor was directed to do work outside the scope of a contract. In such cases, Contracting Officers sometimes lost their warrants and/or were forced to retire; or in one case that I’m aware of, a senior Colonel in the Army received an Article 15 (an administrative punishment that would effectively end one’s Army career). Illegal expenditures in any form are a big deal, but in these cases, they didn’t violate the constitution since the work was authorized and there was an appropriation. In most cases with which I am familiar, the violations were unintentional. (These cases involved the Anti-Deficiency Act, but that is another story.)
I cannot conceive of expenditures in the millions of dollars without an Appropriation. The millions (billions?) paid to Obamacare insurers without an Appropriation is a clear violation of the Constitution to which every Government employee swears an oath the day he or she is hired. Firings, disbarment or prison might be appropriate for the Government employees/officials who illegally approved these payments.
Impeachment would be the appropriate course of action for a President. Instead Republicans chose to pursue a court case. One is left to wonder why the Congress allowed the President and Executive Branch to do it without taking more decisive action. This is exactly the kind of Presidential usurpation of power that Thomas Jefferson feared.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 slipped about 0.1% to 2429.
-VIX rose about 7% to 11.46.
-The yield on the 10-year Treasury rose to 2.215%.
Today’s commentary is not much different than yesterday…
Thursday, Friday and Monday we saw advancing-stocks outpace declining-stocks; advancing volume exceeded declining-volume. This indicates the small caps are gaining traction and is usually a bullish indication. The S&P 500 usually follows the smalls so perhaps the Index can track up from here.
We’re clearing some of the negative signs so perhaps I’ll be able to get more bullish soon. Still, until we see a few more positive signs, I think we are stuck with the same summary again: 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 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 it is apparent that the leadership is flagging. Aerospace and Utilities are rapidly gaining ground. Energy has been doing well in the past several sessions. Technology was AGAIN the worst performer; AGAIN Energy was the best. If Tech underperforms tomorrow, it will be time to sell XLK.
I would avoid XLE; its 120-day moving average is falling; but it has been the leader for the last 2-days. On a shorter term basis the S&P 500 is now outperforming Utilities – I see that as a good sign.
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
MONDAY MARKET INTERNALS (NYSE DATA)
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).
LONG TERM INDICATOR
Monday, 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.)
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
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.