“Federal Reserve officials see the economy expanding at a
steady clip and indicate that an interest rate hike later this year is a near
lock, despite some divisions over where inflation is headed.” Story at…
JOLTS (MarketWatch)
“The number of job openings in the country fell slightly
to 6.08 million in August from a record 6.14 million in July…Ignore the jobs
report for September that showed the
first decline in U.S. employment since 2010. The labor market is
sizzling and most industries still have their “help wanted” shingles out, a
reflection of a sturdy and steadily growing economy in its ninth year of
expansion.” Story at…
ADS BUSINESS CONDITIONS INDEX (Philly FED)
“The Aruoba-Diebold-Scotti business conditions index is
designed to track real business conditions at high frequency. Its underlying
(seasonally adjusted) economic indicators (weekly initial jobless claims;
monthly payroll employment, industrial production, personal income less
transfer payments, manufacturing and trade sales; and quarterly real GDP) blend
high- and low-frequency information and stock and flow data. Both the ADS index
and this web page are updated as data on the index's underlying components are
released.” – Philadelphia FED. ADS Index available at…
TECHNICALLY SPEAKING (RIA)
“Investors seem to be residing in a world without any
notable perceived risks. It is an extraordinary and unprecedented situation,
particularly given unresolved issues of over-leveraging and associated
over-capacity as well as profound disruption of business and
economic models, which are not just depressing inflation but also causing
extreme political and electoral outcomes while feeding Maslowian-type
disappointments across labor markets.” – Victor Shvetz, head of global equity
strategy of the investment bank Macquarie Group. Commentary at Real
Investment Advice at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was up about 0.2% to 2555.
-VIX dipped about 2% to 9.85.
-The yield on the 10-year Treasury slipped to 2.347%.
RSI, (SMA-14)
Relative Strength measures the size of up-moves vs.
all-moves on a 14-day moving average basis and presents the result as a
percentile. For example, if the RSI is 85, it means that the size of up-moves
are in the 85th percentile when compared to all moves over the 14-day
period. If ALL moves had been up, RSI would be 100 – a definite short term
sell indicator. For my purposes, 30 is oversold (suggesting a turn-around to
the upside) and 80 is overbought. If the up-moves and down-moves are equal in
size over the 14-day period, RSI would be 50.
RSI was 84, definitely an overbought reading. There have
been 4 readings over 80 in the last 2 or 3 weeks. RSI is reasonably predictive,
but not perfect of course. The Bollinger Band indicator was very close to oversold.
My sum of 17-Indicators remains bullish on a smoothed
long-term. Today it slipped from +7 to +2.
The number has been bouncing up and down but that is fairly normal; that’s
why I use a smoothed value.
As I’ve been saying, I think that before we see any
meaningful pullback, we need to put in a top.
At this point another big move up, say around 1%, could mark another
short-term top, especially since RSI and Bollinger Bands are warning of
trouble. From there a retreat of some kind, probably in the 3-5% range, is
probable. There’s no guarantee that there will be a big move that signals a
short-term top, but it is fairly common.
I remain bullish longer-term. One wonders when this party
will end so I will worry if the numbers deteriorate, but for now I remain fully
invested.
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…
Aerospace and Defense (ITA) remained #1 today. I am in
ITA as of 21 Sept.
My trade in ITA is up more than 8% in the month I’ve
owned it.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
LONG
As I been saying for a while, it is tempting to make a
VXX trade if and when we get a big move up signaling a short-term top. VIX is at extreme lows. VXX would be a bet
against the market and higher VIX – essentially a short. This is a risky trade since as VIX options
expire, they must be replaced with more expensive options (referred to as
contango). For this reason, VXX will
lose value even if VIX stays the same. I need a really good set-up before I’ll
short. I am not there yet.
My shorting rule is as follows:
-“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
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained 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).
LONG TERM INDICATOR
Wednesday, the
Price indicator was positive; Sentiment, VIX & Volume indicators were neutral.
With VIX recently below 10 for a couple of days in May, June, July, August, September
and now October, 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) 24 March
2017 in my long-term accounts, based on short-term indicators. The remainder
is 50% G-Fund (Government securities). This is a conservative retiree
allocation, but I consider it fully invested for my situation.
