Wednesday, July 19, 2017

Empire Manufacturing … Housing … Crude Inventories … Stock Market Commentary … ETF Trading

“Manufacturing in New York state grew for a second month in July but at a much slower pace, as new orders and shipments both slipped. The Federal Reserve Bank of New York says its Empire State manufacturing index dropped to 9.8 from 19.8 in June. Any reading above zero signals expansion.” Story at…
HOUSING (Marketwatch)
“Builders broke ground on more homes in June, and figures from a prior month were revised up, allaying fears that the housing recovery had stumbled in the spring.
Housing starts were at a 1.22 million seasonally adjusted annual rate…” Story at…
“The Energy Information Administration offered jittery oil markets respite today by reporting a draw of 4.7 million barrels in U.S. commercial oil inventories.” Story at…
My cmt: WTI Crude was up 1.5% on the day.
-Wednesday the S&P 500 was up about 0.5% to 2474.
-VIX dipped about 1% to 9.79, but remains historically near extreme lows. One would need to go all the way back to about 6-months before the Financial Crisis  in 2007 to find VIX this low. This is signaling extreme complacency and is cautionary for the markets.
-The yield on the 10-year Treasury rose to 2.271%.
My sum of 17-indicators was little changed on a smoothed10-day average. It is generally bullish, though. Market Internals are now positive. New-highs look good. Late-day action was up and that’s a bullish sign if it continues.
It looks like the call is LONG on a short-term basis based on the chart. 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, Emerging Markets (SCHE) and Biotech (IBB) ETFs are essentially tied.
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 recently – too busy to worry about it so I don't have a position.
-“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 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). 
Wednesday, 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.