“After Brent and WTI both fell yesterday as traders started
taking profit on the latest price rally, the EIA reported that U.S.
crude oil inventories went up in the week to November 3, by 2.2 million
barrels, rejecting API estimates
of a 1.562-million-barrel draw.” Story at…
https://oilprice.com/Energy/Crude-Oil/Oil-Prices-Slip-After-Surprise-Build-In-Crude-Inventories.html
A Structural Change in the Economy (dShort.com)
My cmt: I am reminded of my wife’s high-school student.
When called out for not doing any work in her class the “child” said, “I don’t
have to work; I’ll be 18 soon and I’m going on welfare.” Welfare is now a
career choice. I don’t know whether this
trend would be enough to shift the stats appreciably. We do know that the
unemployment rate made big improvements only after some emergency welfare
payments were curtailed after the Great Recession. No matter the cause, it’s depressing.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was up about 0.1% to 2594.
-VIX was up about 1% to 9.78.
-The yield on the 10-year Treasury rose to 2.333%.
On the day internals were flat to little improved, but on
a 10-day basis the news is much better. Breadth was up to 52% indicating that
the 10-day total of stocks advancing is positive. Even the volume pulled up to
50% advancing volume on a 10-day basis. The sum of 17-indicators was up from -4
to +2 on the day. (A positive number
indicates that more indicators are bullish than bearish.) Longer term the
indicators may be rolling over to positive, though that is not a done deal yet.
Nothing is clear cut though; Bollinger Bands are within a
whisker of being over bought. Smart money (late day action) is neutral at best.
The Index is at its upper trend line. It can go higher, but it would appear
that its up-side is somewhat limited.
Perhaps we’ve avoided, or postponed that correction once
again. I’m still cautious and lean toward some downside ahead, but the numbers
are leaning otherwise so we shall see.
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…
Technology (XLK) was #1. It‘s time to buy XLK, especially
if we get a dip.
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
My father was a fan of the Dow stocks and he regularly
owned the higher dividend stocks in the Dow.
The chart below shows a momentum based rank, but we need to keep in mind
that these stocks are the Dow 30 after all, and are fairly staid when compared
to the real momentum stocks such as Facebook, Amazon and Google (Alphabet).
My point here is to note that the Dow stocks can have a
momentum component and this analysis provides another data point for a
dividend/Dow investor. Hopefully, this type of analysis would be a reminder not
to hold any stock forever – just look at GE! – or provide some impetus for
owning the better performing Dow stocks. The Dow stocks generally pay a decent
dividend while the true momentum stocks pay none.
Further, this strategy can produce some surprising
results. Following the strategy from 1
May 2017** would have produced about a 43% return (1 May to 7 November) if one
had owned the #1 ranked stock during that period (excluding dividends and
trading costs).
**I’ve only back tested this
system from 1 May because it takes a lot more work to load enough data to
produce a longer test.
Holding times would have been:
Apple (AAPL): 1 May-24 May; 4% gain.
McDonalds (MCD): 25 May -5 July; 2.2% gain
Boeing (BA): 2-days; 0.4%
gain
McDonalds (MCD): 2-days; -0.4%
(loss)
Boeing (BA): 12 July – 24 Oct; 32.8% gain
Caterpillar (CAT): 3-days; 0.7% gain
Intel (INTC): 30 Oct-7 Nov; 2.8% gain
TOTAL = 42.8% GAIN in a little over 6-months
(APPROXIMATE).
I’ve noted the gain as approximate because the analysis
assumes one owned the #1 stock on the day it became #1. In practice that’s not possible since my
analysis is based on closing values. Further, I wouldn’t get these exact values
in practice because I tend to wait a day or two before switching to the new #1
ranking since the rankings can bounce around a bit as the leadership changes.
Still, this is a compelling endorsement of the system especially since it
follows the ETF methodology that I back tested over several years.
The top ranked ETF receives 100%. The rest are then
ranked based on their momentum relative to the leading ETF.
Intel (INTC) remained #1 today. I have owned Intel for
some time – I bought more Halloween, 10/31/2017. Avoid GE, Merck and Disney.
Their 120-day moving averages are falling.
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
LONG
I did take a short-term VXX position on 27 Oct very near
the close. This violates the rules below, but I am eternally hopeful. I am still holding this position; if we
don’t see a down-day Thursday I’ll be out.
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 switched
to Positive on the market.
LONG TERM INDICATOR
Wednesday, Sentiment,
Price, VIX & Volume indicators were neutral. With VIX recently below 10
for a couple of days in May, June, July, August, September, October and now
November, 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.
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.
