Thursday, July 20, 2017

Philly Fed … Jobless Claims … Leading Indicators … Preparing for the End of this Business Cycle … Inventories … Stock Market Commentary … ETF Trading

PHILLY FED (MarketWatch)
“Manufacturers reported solid, but slowing, growth in July, according to data released Thursday. The Philadelphia Federal Reserve said its manufacturing survey in July fell to 19.5…”  Story at…
This was the slowest growth this year, but it is still growth.
“The number of Americans filing for unemployment benefits fell more than expected last week, touching its lowest level in nearly five months, suggesting strong job gains that should continue to underpin economic growth.” Story at…
“A broad measure of how well the U.S. economy is performing surged in June after a strong gain in May, suggesting growth could speed up in the months ahead. The leading economic index jumped 0.6% last month…” Story at…
“…We are not the only ones gradually becoming more “fearful” by beginning to reduce the risk of our client’s assets. As mentioned above, the world’s largest hedge fund manager, Ray Dalio of Bridgewater, says to start dancing closer to the exit with an eye on the tea leaves… Daniel Ivascyn, Chief Investment Officer of PIMCO, who took over the reins from Bill Gross, said they are beginning to shift their bond fund to higher quality assets like US Treasuries while selling richly-valued US corporate bonds…JPMorgan Chase & Co. Chairman Jamie Dimon said the unwinding of central bank bond-buying programs is an unprecedented challenge that may be more disruptive than people think.” Commentary, charts and analysis at…
-Thursday the S&P 500 was essentially unchanged.
-VIX dipped about 2% to 9.58, but remains historically near extreme lows.
-The yield on the 10-year Treasury rose to 2.265%.
VIX remains at 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.
My sum of 17-indicators jumped up today giving a bullish reading. Market Internals are now positive. New-highs look good. Unfortunately the sky is not completely blue.
Late-day action was down and that’s a bearish sign.  More worrying though, RSI and Bollinger Bands are getting stretched suggesting, once again, that the market may soon pause or retreat some.  Overall though, these signs are not signaling short-term sell at this point.
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, 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). 
Thursday, 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.