Friday, June 23, 2017

Home Sales … The Fed is Making a Mistake … Market Analysis … Trading ETFs and ETF Ranking

“Sales of new homes rebounded in May, helped by strong sales gains in the South and West. Sales new single-family homes rose 2.9% last month to a seasonally adjusted annual rate of 610,000…”
“…there is mounting evidence the Fed is headed towards making another mistake in their long line of creating “boom/bust” cycles…Looking back through history, the evidence is quite compelling that from the time the first rate hike is induced into the system, it has started the countdown to the next recession. However, the timing between the first rate hike and the next recession is dependent on the level of economic growth at that time...With economic growth currently running at THE LOWEST average growth rate in American history, the time frame between the first rate and next recession will likely not be long.” – Lance Roberts. Commentary at…
-Friday the S&P 500 was up about 0.2% to 2438.
-VIX was down about 4% to 10.02. (That’s ridiculous low volatility and is actually a concern for the future.)
-The yield on the 10-year Treasury dipped to 2.142%.
Today was a Russell Index rebalance day as of the close.  Volume was high. Numbers were good, but it’s hard to know what to make of the day’s data.
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. I plan to get into IBB Monday, unless it tanks.  IBB and XLV could be subject to big swings depending on the healthcare vote.
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 remain 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). 
Friday, 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.