Wednesday, July 12, 2017

FED Beige Book … Crude Inventories … Yellen Dovish … Market Analysis … Trading ETFs and ETF Ranking

FED BEIGE BOOK (MarketWatch)
The Federal Reserve says a shortage of qualified workers in the U.S. has “limited” hiring, but there’s little evidence firms are raising wages to attract jobseekers, according to the central bank’s latest deep dive on the economy. The so-called Beige Book, the Fed’s regular survey of business conditions around the country, said economic growth was “slight to moderate” from late May through June.” Story at… 
“U.S. crude oil inventories last week dropped the most in ten months, falling more than expected as imports declined and refining rates rose, while gasoline stocks decreased…” Story at…
“…Fed Chair Janet Yellen's testimony was taken to mean the central bank won't be hiking rates all that much…The testimony released for Yellen's appearance before a House committee Wednesday morning highlighted that the Federal Reservebelieves it is not that far from the neutral rate.” Story at… 
-Wednesday the S&P 500 was up about 0.7% to 2443.
-VIX dropped about 5% to 10.3.
-The yield on the 10-year Treasury slipped to 2.313%.
Bull signs…The 5-10-20 Timer system switched to buy since the 5-dEMA and the 10-dEMA are now higher than the 20-dEMA; New-highs are improving; Market Internals have improved, but not by much.
On the bearish side…Bollinger Bands are tight with the S&P 500 Index very close to the upper band; smoothed up-volume is falling; late-day-action (Smart Money) suggests the Pros are still in a cautious mode.
At this point, we’re still sitting close to neutral short-term, but I’m guessing new-highs may be in store for the Index.
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 US Biotechnology (IBB) was #1, but Aerospace and Defense (ITA) was close enough to be tied for 1st.
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). 
Wednesday, Sentiment, 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.