Wednesday, June 28, 2017

Home Sales … Crude Inventories… Market Analysis … Trading ETFs and ETF Ranking

HOME SALES (MarketWatch)
“Home purchase contract signings declined again in May, another sign of the headwinds working against momentum in the housing market. The pending home sales index from the National Association of Realtors slid 0.8%, marking the third-straight monthly decline.” Story at….
“Oil futures climbed more than 1 percent on Wednesday to their highest in more than a week as buyers were encouraged by a small weekly decrease in U.S. production and shrugged off a surprise build in crude inventories in the world's top oil consumer. The U.S. Energy Information Administration (EIA) said crude stocks rose 118,000 barrels…” Story at… 
-Wednesday the S&P 500 was up about 0.9% to 2440.
-VIX fell about 9% to 10.03.
-The yield on the 10-year Treasury rose to 2.225%.
-Wednesday was a statistically significant (big) up-day and that is usually followed by a down-day the next day. We had big down-day (stat-sig) yesterday and back and forth movement of statistically significant days can indicate a top. It doesn’t have to though. On a positive note, the Index finished about a half percent above the 50-dMA Wednesday.  Perhaps the dip-buyers have saved the day. I doubt it though; the Bollinger Band Squeeze remains in play.
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 Healthcare (XLV) was #1 and Biotechnology (IBB) slipped to #2. I am waiting a bit before moving back in due to a few bearish indications. Other than Healthcare, the remaining ETFs are showing little dispersion and that can be a sign of trouble.  Healthcare is doing well because investors are betting there will be little or no change to Obamacare.
Utilities, XLU, is now lagging the S&P 500 on shorter time-frames. So the Strong Utilities warning is fading.
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 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 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.