Friday, June 30, 2017

Personal Spending … PCE Prices … Chicago PMI … Michigan Sentiment … Market Analysis … Trading ETFs and ETF Ranking

Once again computer problems have been vexing. Looks like its time for a new laptop.
“U.S. consumer spending rose modestly in May and inflation cooled, pointing to a slow-but-steady economic expansion that could still lead the Federal Reserve to raise interest rates by the end of the year.” Story at…
PCE PRICES (Barrons)
“The Federal Reserve’s favorite measure of inflation, the core Personal Consumption Expenditures (PCE) index, fell to its lowest level in months -- just 1.4% year-over-year…” Story at…
“U.S. Midwest manufacturing activity unexpectedly strengthened to its strongest level in a little over three years in June, an index jointly developed by MNI Indicators and ISM-Chicago released on Friday showed. The Chicago Purchasing Management Index…climbed to 65.7…” story at…
-Friday the S&P 500 was up about 0.2% to 2423.
-VIX dipped about 2% to 11.18.
-The yield on the 10-year Treasury rose to 2.301%.
We’ve seen the leaders drop as Tech has fallen about 5% in 3-weeks. At the same time, my Sentiment indicator is close to giving a sell signal.  What’s with that? Bollinger Bands have been exceptionally close indicating a super-calm market. Calm markets are a sign of trouble – they can’t be calm forever.  When they break it can happen quickly.  In theory, the break could be to the upside, but I’m not betting on that. (I’m not short either.) Speaking of Bollinger Bands, they actually signaled “oversold” yesterday.  That indication is not really valid since the bands are so close together a break in either direction is possible. (Bollinger bands mark 2-std deviations above and below the index.) RSI is generally neutral. The 40-dMA of New-highs is falling and that’s not a great sign. This longer term indicator tends to get it right more times than not, but it shows a general trend and a lot of variation can take place within the trend.
The S&P 500 is about 0.5% above its 50-dMA and 1.2% below its all-time high. Can this market make up its mind?
Short-term I am watching – it still looks like a small pullback is likely, but certainly not guaranteed. As of now the S&P 500 has pulled back 1.4% from the all-time high. 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) remained  #1; Healthcare (XLV) was #2. I hold these ETFs as trading vehicles. Until we get a handle on the overall direction of the market I am on hold.
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). 
Friday, Price, 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.