Thursday, August 3, 2017
Jobless Claims … ISM Services … Stock Market Analysis … ETF Trading
JOBLESS CLAIMS (Washington Examiner)
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.
“U.S. jobs growth remains on a hot streak, if business at state unemployment agencies is any indication.
New claims for unemployment benefits dropped 5,000 to 240,000 in the last week of July…” Story at…
ISM SERVICES (MarketWatch)
“A reading of service-sector activity slowed in July to the weakest rate of growth in 11 months, according to data released Thursday. The Institute for Supply Management said its nonmanufacturing index fell to 53.9%in July…” Story at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 was down about 0.2% to 2472.
-VIX was up about 2% to 10.44.
-The yield on the 10-year Treasury slipped to 2.221%.
Bearish signs are getting worse:
-The sum of 17-Indicators is falling sharply on a smoothed long-term basis and has dropped into negative territory so the indicators I track are getting more bearish.
-Market Internals deteriorated on a 10-day basis and are now giving a negative signal. Over the last 10-days 49.9% of stocks have advanced on the NYSE.
-Cyclical Industrial stocks are underperforming the S&P 500 a negative sign but this indicator did improve some today.
-Money Trend is still positive, but it is falling sharply and is close to slipping to the sell side. (This indicator attempts to estimate whether money is going into or out of stocks – with varying degrees of success.)
I think at this point we have to get Bearish in the short-term.
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 and long-term indicators remain neutral. A short-term pullback seems more likely now.
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 ETF (SCHE) and Aerospace and Defense (ITA) are tied for #1. Time to sell IBB if you are still holding it. I lean towards ITA, but SCHE would is OK too and it might turn out to be a leader later. 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 – perhaps I’ll take a short-term flyer on VXX, betting the VIX will rise soon. This is high risk and I lost money the last time I tried this trade. With VIX near all-time lows, the bet is a better risk now; but this trade violates the advice below – so watch out!...small position with tight stops. If there is a big jump higher in the VIX, forget it – we’re too late.
-“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
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals switched to Negative 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).
LONG TERM INDICATOR
Thursday, Price is positive (perhaps too 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.)
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
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.