Monday, July 17, 2017

Stock Market Commentary and ETF Trading

Short post today…I’m too busy.
-Monday the S&P 500 was down a fraction – essentially unchanged.
-VIX rose about 3% to 9.82, but remains historically near extreme lows. (This is signaling extreme complacency.)
-The yield on the 10-year Treasury dropped to 2.318%.
My sum of 17-indicators is a reasonably bullish +7 on the day, down from +8 last trading-day.  Since there is a lot of volatility in this indicator, I use a smoothed10-day average. That number is falling slightly too, but it remains generally bulish.
The S&P 500 is getting sold late in the day on a regular basis.  It seems that traders don’t want to hold overnight.  It suggests they are worried, but so far no one has blinked and the markets keep advancing.
The S&P 500 managed to slip less than 2% - not much of a pullback. So it appears that the pullback has been postponed based mostly on a review of the charts.
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.
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 Biotechnology (IBB) remains #1.
I would avoid XLE; its 120-day moving average is 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 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 switched to 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, Sentiment, Price, Volume, & VIX indicators were neutral. (VIX would be signaling BUY now, but 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 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.