Thursday, July 6, 2017

ADP Employment … Jobless Claims …. ISM Services … Crude Inventories … Market Analysis … Trading ETFs and ETF Ranking

ADP EMPLOYENT (Marketwatch)
“Employers added a seasonally adjusted 153,000 jobs during the month, payroll processor ADP said. That was below the 180,000 jobs that a consensus of economists had forecast.” Story at…
“The number of Americans applying for first-time unemployment benefits rose last week for the third consecutive time, though overall numbers remain consistent with steady job gains. Initial jobless claims, a proxy for layoffs across the U.S., rose 4,000 to a seasonally adjusted 248,000 in the week ended July 1…” Story at…
ISM SERVICES (MarketWatch)
“The U.S. service sector expanded at a healthy pace in June, according to a closely watched survey released Thursday. The Institute for Supply Management’s nonmanufacturing index rose to 57.4%....” Story at…
“Oil rose on Thursday, recovering some ground after a surprisingly upbeat picture of U.S. demand halted the previous day's slide, although the prospect of oversupply in 2018 prompted yet more analysts to cut their price forecasts….Data from the American Petroleum Institute (API) on Wednesday showed U.S. crude inventories fell more sharply than expected, down 5.8 million barrels in the week to June 30…”
-Thursday the S&P 500 was down about 0.9% to 2410.
-VIX rose about 13% to 12.54.
-The yield on the 10-year Treasury rose to 2.372%.
Like yesterday, today’s numbers were weak, but much worse: Declining stocks outpaced Advancing stocks by nearly 4 to 1; declining volume was nearly six times the advancing volume; the spread (New-highs – new-low) fell and new-lows outpaced new-highs. Unlike yesterday, the S&P 500 followed the Market Internals down. The Index closed below its 50-dMA. The day was a statistically significant (big) down-day exceeding my statistical parameters and that is usually followed by an up-day the next day. Over the past 20-days late-day-action has been down suggesting the Pros have been selling. Late day action was down big today and the closing Tick (last trades of the day) was -561. The “5-10-20 Timer System” is issuing a “sell” since the 5-dEMA and the 10-dEMA have both dropped below the 20-dEMA.
Surprisingly, other signals are not strong either way. Bollinger Bands are now signaling “oversold”, but they were close together so a move to the upside would have given an “overbought” reading. In other words, Bollinger Bands can’t be trusted today. RSI is 42 (neutral) and it would have to drop to 30 to generate an oversold reading, but that could happen quickly.
Cyclical Industrials (XLI) are out performing the S&P 500 suggesting that investors aren’t worried. Perhaps this is buy-the-dip moment? The S&P 500 is only down 1.8% so it seems like there should be some more move down. I’ll wait for some confirmation either way.
Longer-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; but Healthcare (XLV) is close behind. Either would be OK at this point. I am still waiting for some confirmation on direction since I tend to treat the ETFs as a trading vehicle.
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 remained 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, Sentiment was negative. Price, Volume, & 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.