Friday, July 21, 2017

Economy in Trouble? … VIX Near All-time Low … Stock Market Commentary … ETF Trading

“…The chart below shows corporate receipts in April contracted most since 2009, when the economy was in midst of the Great Recession...”
“...Despite a surge in optimism after the election, nominal GDP growth in 2016 was just 2.95%. This makes 2016 the second-worst year on record since 1959.” Commentary at…
“One measure of fear on Wall Street on Friday booked its second-lowest finish ever, according to FactSet data. The CBOE Volatility Index, or VIX, wrapped up the session down 2.3% at 9.36, marking the lowest close since the so-called "fear gauge" ended at 9.31 in December 1993 at 9.31.” Story at…
-Friday the S&P 500 was down a point to 2237.
-VIX dipped about 2% to 9.36 (2nd lowest in history).
-The yield on the 10-year Treasury rose to 2.265%.
As noted previously…
VIX remains at extreme lows and has now reached the 2nd lowest VIX reading on record. One would need to go all the way back to about 6-months before the Financial Crisis in 2007 to find the last period when VIX was below 10. This is signaling extreme complacency and is cautionary for the markets.
Most indicators are turning up including late-day action.  Things are looking good, but perhaps too good if this continues. The Advance-Decline ratio is signaling “overbought,” but this signal tends to be early. Overbought can remain in place for some time. For now, it looks like the markets may continue to make new highs for awhile longer.
RSI was better today; and Bollinger Bands improved, but remain stretched suggesting, once again, that the market may soon pause or retreat some.  Overall though, these signs are not enough to worry too much at this point.
It looks like the call is LONG 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 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, Biotech (IBB) ETFs was #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.
Neutral, with no positions recommended. - 5/24/2017 thru present.
I haven’t been doing much in the trading portfolio – too busy to worry about it.
-“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, Sentiment, Price, 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.