Wednesday, August 2, 2017

ISM Index … Auto Sales Personal Spending … PCE Prices … Construction Spending … Stock Market Analysis … ETF Trading

TUESDAY’S REPORT FOLLOWS (Computer problems again)…
“While falling short of June’s pace, manufacturing output began the second half of 2017 in decent shape, according to data issued in the Institute for Supply Management’s (ISM) monthly Manufacturing Report on Business…” Story at…
AUTO SALES (Business Insider)
“The slump in US auto sales extended into July with the so-called Big Three carmakers reporting declines that were worse than expected.” Story at…
GM sales were down 15%; Ford was down 7%. Some of the overseas manufacturers showed increases.
“U.S. consumer spending barely rose in June as personal income failed to increase for the first time in seven months amid a decline in dividend payments, pointing to a moderate pace of consumption growth in the third quarter…There was also little sign of inflation. The personal consumption expenditures (PCE) price index, excluding food and energy, rose 0.1 percent in June…” Story at…
“U.S. construction spending unexpectedly fell in June as investment in public projects recorded its biggest drop since March 2002, suggesting a downward revision to the second-quarter economic growth estimate…construction spending tumbled 1.3 percent…” Story at…
Chart from…
This is just a 200-day moving average crossover method that is easy to follow. Buy if the Index is above the 200-dMA and sell if it’s below.
-Tuesday the S&P 500 was up about 0.2% to 2476.
-VIX was down about 2% to 10.09.
-The yield on the 10-year Treasury slipped to 2.254%.
RSI is improved to a neutral signal.  This isn’t an all-clear yet because it was recently “sell”.  New-highs flattened out on a smoothed basis, but they need to move up and break the downtrend line that has been in place for nearly a year before we can get too bullish. The sum of 17-Indiicators improved as did the Market Internals.
The call is NEUTRAL on a short-term basis. Cyclical Industrial stocks are underperforming the S&P 500 and that usually doesn’t happen if investors are optimistic.
Longer-term, I’m cautiously bullish; I will worry more in late-summer (we’re almost there) and into early fall, but I remain fully invested. There isn’t any news now that signals a bear market.
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) ETF was #1. I would wait for a day or two to see if this is confirmed. IBB and ITA remain close. 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 – too busy to worry about it; but the call is now NEUTRAL as noted above.
-“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). 
Tuesday, Price is positive; Sentiment, 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.