“U.S. retail sales recorded their biggest increase in
2-1/2 years in September likely as reconstruction and clean-up efforts in areas
devastated by Hurricanes Harvey and Irma boosted demand for building materials
and motor vehicles.” Story at…
CPI (MarketWatch)
“The consumer price index rose 0.5% in September, the second
big increase in a row and the largest in eight months…If food and energy are
stripped out, core CPI rose a much smaller 0.1%.” Story at…
CONSUMER SENTIMENT (Bloomberg)
“U.S. consumer sentiment unexpectedly surged to a 13-year
high as Americans’ perceptions of the economy and their own finances rebounded
following several major hurricanes, a University of Michigan survey showed
Friday.” Story at…
TRUMP CANCELS OBAMACARE SUBSIDIES? NOPE
“…congressional Republicans successfully
challenged in a lawsuit the Obama administration's decision to make the
reimbursement payments to insurers without getting the express budgetary
authorization from Congress.” – CNBC
https://www.cnbc.com/2017/10/12/obamacare-bombshell-trump-kills-key-payments-to-health-insurers.html
My cmt: I worked in the Federal Government for 35-years.
I ran the USACE Operation and Maintenance Program in the Commonwealth of
Virginia for several years. There is a long-standing rule established in
Constitutional Law, and well understood in the Federal Government, that states
there are 2 Bills that must be passed before funds can be spent: (1) an Authorization
Bill (2) an Appropriation Bill. It is unlawful to spend funds without
both. The Justice Department ruled that
in the absence of an Appropriation, the Government can’t spend money to
subsidize Health Insurance companies under Obamacare. The idea that an existing President should
continue violating the law is an abomination – or perhaps I should say an
Obamanation. If you read the news today, Trump was the bad guy. No, he is
following the law and the Constitution. Regardless of how one feels about
Obamacare or any other program for that matter, I am troubled by the attitude
that the Constitution should be ignored if the reason is for the “good of the
people.” It is rare that what is “good-for-the people” is good for every
person. That’s why we have a Constitution – to protect the individual.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up about 0.1% to 2553.
-VIX dropped about 3% to 9.61.
-The yield on the 10-year Treasury slipped to 2.275%. (This
suggests Treasuries were bought implying the Bond Ghouls are worried about the
stock market.)
The S&P 500 has been flipping back and forth for
several days as Mr. Market tries to make up his mind – pullback or not? Today
the Index was up 0.09%. Over the last 5-days it is up 0.15%. Ignoring today, it
would be just about flat. Perhaps
investors are confused. The Pros are giving us a clue. The Pros were selling yesterday,
based on late day action, and today was more of the same. It’s hard to get too
wound up though, since we haven’t seen much downside to the markets.
My sum of 17-Indicators remains bullish on a smoothed
long-term. Today this stat was unchanged at +3. New-highs continue to climb,
but the rate of that climb is slowing. As of now, new-highs are still bullish. Internals
generally look pretty good, still a correction is always possible.
As I’ve been saying for a while, 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.
If the report looks similar to recent ones, it’s because
there has been little change in indicators recently.
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 3%
in the 3-weeks I’ve owned it. (Had a typo here. That’s embarrassing.)
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
FRIDAY 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
Friday, the Price
and VIX indicators were positive; Sentiment & 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.
