Thursday, August 10, 2017

Jobless Claims … Producer Price Index (PPI) … Stock Market Analysis … ETF Trading

“The number of Americans filing for unemployment benefits unexpectedly rose last week, but the underlying trend remained consistent with a tightening labor market.” Story at…
U.S. wholesale prices declined in July for the first time in almost a year, further evidence of soft inflation that is bedeviling the Federal Reserve. The producer-price index fell 0.1% in July…” Story at…
-Thursday the S&P 500 was down about 1.5% to 2438.
-VIX was up about 44% to 16.04.
-The yield on the 10-year Treasury slipped to 2.197%.
The S&P 500 dropped below its 50d-MA so that may cause some angst in the investment community. There are numerous bearish signs:
-The sum of my 17-Indicators is still falling sharply on a smoothed long-term basis and has dropped into negative territory so the indicators I track are still getting more bearish each day.
-The 10-day measure of advancing stocks was 43.5% indicating that less than 50% of stocks on the NYSE have been advancing over the last 10-days.  That’s another bearish sign. 
-Advancing volume is falling too, and on a 10-day basis only 42% of the volume has been advancing.
-Money Trend is falling and below zero. 
The signs are not all bearish though:
-The big move Thursday was statistically significant based on the standard deviation of the price-volume when compared to recent history. That is likely to result in an up-day tomorrow. Further, a big jump in standard deviation can suggest capitulation or the start of something bigger.  To see if were at the bottom (or closer to a top) we can examine Bollinger Bands and Relative Strength Index (RSI).
-Bollinger Bands were “oversold” today. In the past few years this has always led to at least a respite from selling and has usually signaled a bottom. RSI slipped below 29 and that too is an oversold reading. This too has signaled bottoms although the final bottom has sometimes been 1 or 2% lower than the first RSI oversold.  
-My suspicion in that the S&P 500 is within 1 or 2% of a short term bottom.  That 10% correction still may be a bit further off – but what do I know.  Short-term predictions are mostly educated guesswork…with the emphasis on guesswork, but…
if indicators continue to deteriorate, I’ll make some portfolio adjustments i.e., hold less stocks. The wild-card is geo-politics. Are we going to war with N. Korea?
-If you are holding VXX (I would be, but I got stopped out.) it is time to take profits.
I think at this point we have to lean Bearish in the short-term. But realize that the bottom may not be far off. Only time will tell.
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. The 150-dMA of Breadth (%-advancing stocks) is still solidly above 50% so longer term the Index is still in decent shape.  
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, Aerospace and Defense (ITA) remained #1. 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 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
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). 
Thursday, Price; Sentiment, & Volume indicators were neutral. VIX was indicating sell, but with VIX recently below 10 for a couple of days (May and June, and 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.