Monday, July 31, 2017

Chicago PMI … Home sales … Stock Market Analysis … ETF Trading

CHICAGO PMI (MarketWatch)
“The economy in the Chicago region grew rapidly in July but cooled a bit from earlier in the summer, indicating that businesses are still confident despite political drama in Washington. The Chicago business barometer, or Chicago PMI, slipped to 58.9 in July from a three-year high of 65.7…” Story at…
"Contracts to buy previously owned U.S. homes rebounded in June after three straight monthly declines, but the housing market remained constrained by a shortage of properties available for sale.” Story at…
-Monday the S&P 500 was down about 0.1% to 2470.
-VIX was up about .3% to 10.26.
-The yield on the 10-year Treasury was up slightly to 2.299%.
Not much changed from Friday.
RSI is still screaming sell.  New-highs are moving down on a smoothed basis; Money Trend is headed down, but is still above zero (That suggests there is still buying, but the up-trend is slowing. New-high/new-low data is also headed down.); the daily sum of 17-indicators is falling, so indicators are slipping. 
Late day action is reasonably bullish on a smoothed basis; but it was down late in the day today, a bearish sign on the day.  I’ll watch the smoothed version (there’s too much variation day-to-day).  This probably means the Pros haven’t bought into a correction yet.
Advancing stocks outpaced declining stocks Friday as did advancing volume.  On a daily basis internals were optimistic. Longer term the %-of stocks advancing on the NYSE was 52.9% on a 10-day basis. Any number above 50% is good.
The call is NEUTRAL on a short-term basis. Longer-term, I’m cautiously bullish; I will worry more in late-summer and into early fall, but I remain fully invested.
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
The letters across the x-axis are the ticker symbols for 15 exchange-traded funds (ETFs) on the NYSE.
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, the Biotech ETF (IBB) remains #1. I would avoid XLE; its 120-day moving average is still falling. 
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
I take a portion of my cash and apply it strategically to improve returns in cash. My short-term trading has never been about get-rich-quick.
I haven’t been doing much in the trading portfolio – too busy to worry about it; but the call is now NEUTRAL as noted above.
-“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). 
Monday, Price is positive; Sentiment, Volume, & VIX indicators were neutral. (With VIX recently below 10 for a couple of days (May and June, and now July), VIX may be prone to incorrect signals. Usually, a rising VIX is a bad market sign; now it may move up, but that might 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.