Tuesday, June 6, 2017

Payrolls … Hourly Earnings / Avg Workweek … Market Analysis … Trading ETFs and ETF Ranking

Oooppps. Friday's note didn't get posted. Here it is...
“Job creation fell sharply in May with just 138,000 new positions created, while the unemployment rate declined to 4.3 percent… Wage growth also disappointed, with average hourly earnings rising at a 2.5 percent annualized pace. The average work week was unchanged at 34.4 hours.” Story at…
-Friday the S&P 500 rose about 0.4% to 2439.
-VIX dropped about 1% to 9.75. (Below 10 remains a worry since it shows extreme complacency.)
-The yield on the 10-year Treasury dipped to 2.162%.
The story for the day was volume. Down-volume exceeded up-volume. 48% of the volume was up. In addition, unchanged volume was a very high 100-million shares.  There are some who believe that high unchanged volume is a warning for the markets because it is evidence of investor confusion. (I could never confirm this view in my data mining – it makes sense though.)
There were 340 stocks that made 52-week highs today. That’s a healthy number; perhaps too healthy.
Tick was +860.  That’s definitely too healthy (too high); it looks like too much bullishness to me. The 10-dMA of Tick (last trades of the day) has exceeded 300 (it’s now 314) and that (according to Tom McClellan) is a bear sign at least for some sort of pullback.
The S&P 500 exceeded its upper Bollinger Band (2-std deviations) and that’s a warning sign.  RSI is still neutral so this isn’t a screaming sell.
Utilities are outperforming the S&P 500 over the last 2-months but not by much. The fact that Utilities are is not a strong warning.
The Advance/Decline ratio is “overbought” based on the advance decline data, but it can remain so for some time.  Wall St doesn’t put as much faith in this one as they once did.
Market Internals remained positive on the market. 
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 may worry 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) is No 1. 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.
-“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 remained 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). 
Friday, Price, and Volume were bullish; 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.)
A “buy” now means very little since the NTMS is prone to give Buy signals near tops.  The last important BUY-signal was 15 November 2016.
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 23 February and the last actionable signal was a BUY (from a prior sell) on 15 November 2016.