“The number of Americans filing new applications for
unemployment benefits dropped last week from already low levels, a sign of
health in the U.S. labor market.
Continue Reading Below Initial jobless claims, a proxy
for layoffs across the U.S., declined by 12,000 to a seasonally adjusted
232,000 in the week ended Aug. 12…” Story at…
PHILLY FED (Marketwatch)
“Mid-Atlantic manufacturers reported slightly slower, but
still positive, growth in August, according to a report out Thursday. The
factory activity survey from the Philadelphia Federal Reserve fell to 18.9 from
19.5…” Story at…
INDUSTRIAL PRODUCTION (CNBC)
“U.S. factory output fell in July, pulled down by
tumbling auto production.
The Federal
Reserve says factory production dropped 0.1 percent last month.
Overall industrial production — which adds output by mines and utilities — rose
0.2 percent.” Story at…
LEI (MarketWatch)
“A broad measure of how well the U.S. economy is
performing climbed again in July and signaled potentially faster growth in the
final six months of 2017. The leading economic index rose 0.3% last month after
a frothy 0.6% increase in June…” Story at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 was down about 1.5% to 2430.
-VIX jumped up about 32% to 15.55.
-The yield on the 10-year Treasury slipped to 2.192%.
It would be easy to list the Bearish signs that have
cropped up recently. Instead, let’s first look at some...
BULLISH SIGNS
- The day was a statistically significant (big) down-day
exceeding my statistical parameters and that is followed by an up-day the next
day about 60% of the time.
-The S&P 500 is sitting on its lower trend line, 0.8%
below its 50-dMA. This has been an area of support in the past.
- My Money Trend indicator turned up today. This
indicator attempts to follow the general concept of Lowry Research and their supply and demand methodology for stock market
analysis. Their concept is based on a detailed stock-by-stock analysis while
mine is an estimate based on readily available Macro data. Theirs is much more accurate, but that
doesn’t mean mine isn’t useful.
- My sum of 17-indicators was up on the day; on a
smoothed basis it slowed its decline suggesting a turn upward soon.
- The late-day action indicator flattened out suggesting
Pros may start buying.
-The % of stocks on the NYSE that have been advancing
over the last 10-days dipped to 43% which marked a slowed decline. Further, the
10-dMA of Breadth (%-advancing stocks) was 43% and the 20-dMA was 46.4%. Both
of these numbers are below the %-advancing stocks at the bottom of Feb 2016 13%
decline in the S&P 500. The damage to internals has been worse than the
Index suggesting this “correction” may not have too much farther to go.
- Bollinger Bands are indicating “oversold”.
-RSI (14-day, SMA) was 35, very close to an oversold reading.
A few BEARISH SIGNS…
-Market Internals are still negative and the
new-high/new-low data has not yet turned up.
-The 5-10-20 Timer has flashed sell. (The 5-dMA and the
10-dMA have dropped below the 20-dMA.) This signal can swing back and forth
more than I’d like.
It wouldn’t surprise me to find that today was the bottom
of this smaller than expected pullback. If not, the 200-dMA is around 2345 and
that is a logical point of support that may stop the downturn.
Small moves, less than 10%, are rarely re-tested; thus
calling a bottom on a small move is witchcraft. (If only we had Sybill Trelawney
to help us divine the future.) I said yesterday that “…the market is most
likely to fall as we move forward over the next week.” My guess is that the
Index made a short-term bottom today; guesses can be wrong, though – we’ll just
have to wait and see..
Longer-term, I’m cautiously bullish; I will worry more if
the numbers continue to deteriorate, but I remain fully invested. There isn’t
any news now that signals a bear market and long-term indicators remain neutral.
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…
Once again, Aerospace and Defense (ITA) remained #1.
Avoid XLE and IWM; their 120-day moving averages are 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 recently; I don’t have time to watch
and I think short-term trading takes a watchful eye.
-“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
remained 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,
Sentiment & Volume indicators were neutral. VIX was indicating negative,
but with VIX recently below 10 for a
couple of days (May, June, July and now
August), 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.
