Thursday, June 22, 2017

Jobless Claims … Playing with Fire … Market Analysis … Trading ETFs and ETF Ranking

“Fewer than 250,000 Americans applied for unemployment benefits in mid-June, underscoring the strength of a U.S. jobs market whose biggest problem is a growing shortage of qualified workers. Initial jobless claims rose by 3,000 to 241,000 in the seven days stretching from June 11 to June 17…” Story at…
PLAYING WITH FIRE (Northman Trader Blog)
“As I’ve outlined previously from my perspective we are in the final move up paving the way for a larger top in 2017 setting us up for a recessionary move into 2018/2019 and beyond with potentially far reaching consequences if central banks lose control of the liquidity house of cards they have built all around us. And, if this is so, we are finding ourselves presented with a perhaps generational selling opportunity... We are now reaching the upper risk range we’ve been discussion for a while and we know it could still squeeze into it (2450-2500)… We consider any $SPX moves above 2450 (as yesterday) to be a selling opportunity setting up for a sizable technical correction and volatility spike. ” Commentary at…
-Thursday the S&P 500 was down about 1pt to 2435.
-VIX was down about 3% to 10.48. (The Options Boys aren’t worried.)
-The yield on the 10-year Treasury rose to 2.158%.
In another reversal, New-Highs are now greater than New-Lows. This just shows some investor indecision, but at least it's headed up and that's good.  Most indicators are headed down. Smart money (late-day-action) fell hard today and this stat is falling on a 20-day basis. That’s bearish, but not too bearish. Advancing volume is falling; New-highs are falling; breadth (% of stocks advancing) is falling over the last 10-days; Money Trend is drifting down; the sum of 17-indicators is down on a smoothed basis.  Bottom line – indicators continue to get more bearish, but not drastically so. No smoking gun on a correction yet. Like we noted before, this might only be a couple % pullback. Short-term I am watching.
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…
Over the last 4-days there have been 4 different ETFs ranked #1. Today it was Biotechnology (IBB) followed by Health Care (XLV). I’ve been waiting for a clear leader to get back in. IBB had the strongest showing in a while.  It looks like the crowd is headed there.
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). 
Thursday, 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.