FED BEIGE BOOK (Bloomberg)
“The U.S. economy grew at a modest to moderate pace
through mid-November as price pressures strengthened and the labor market
tightened, a Federal Reserve survey showed. The central
bank's Beige Book economic report, based on anecdotal
information collected by the 12 regional Fed banks through Nov. 17, said
business contacts also reported a brightening view as they look ahead.” Story
at…
GDP (Business Insider)
“A second estimate of third-quarter gross domestic
product on Wednesday showed that the US
economy grew at a 3.3% annualized rate, the strongest since Q3 2014.”
Story at…
PENDING HOME SALES (Reuters)
“Contracts to buy previously owned homes rebounded in
October as the market recovered from hurricane-related effects in the South of
the country but activity continued lag year ago levels. The National
Association of Realtors said on Wednesday its pending home sales index rose to
a reading of 109.3.” Story at…
CRUDE INVENTORIES (OilPrice.com)
“The Energy Information Administration reported a
3.4-million-barrel draw in crude oil inventories for the week to November 24…”
Story at…
CORPORATE TAXCUTS (RIA)
“The tax bill, as it is currently proposed, will increase
the deficit by $1.5 trillion over ten years. As such, the government will
borrow an additional $1.5 trillion on top of current projections of
approximately $1 trillion per year.
When the government borrows money to fund a fiscal deficit
they effectively crowd out investment that could have funded the real economy.
Said differently, the money required to fund the government’s deficit cannot be
invested in the pursuit of innovation, improving workers skills, or other
investments that pay economic dividends in the future. As we have discussed on
numerous occasions, productivity growth drives economic growth over the longer
term. Therefore, a lack productivity growth slows economic growth and
ultimately weighs on corporate earnings.”
- Michael Lebowitz, CFA. Commentary at…
Mt cmt: As I wrote back on 9 November 2016: “I didn’t
support Donald J. Trump for a number of reasons, but especially because his
stated plan (cutting taxes and increasing spending) will double the National
Debt…again…”
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was down about 1 pt to 2626.
-VIX was up about 7% to 10.7.
-The yield on the 10-year Treasury rose to 2.388%.
The following is true again: Indicators were little
changed on the day and continue to improve when compared to 10-days ago. That’s
good news for the bulls and continues to support my bullish view in the short
and long-term. Breadth is improving; up-volume is 59% over the past 10-days;
Cyclical industrial stocks (XLI-ETF) continue to improve when compared to the
S&P 500. Cyclicals would be falling if investors were worried.
On the Bearish side: Bollinger Bands are again
“overbought.” The Smart Money (late day action) is still headed down, but it is
hinting at a reversal up. RSI is currently neutral. The overbought/oversold
ratio is now overbought, but this indicator is traditionally early so it is not
important.
My guess is that a short-term top is much further off.
Perhaps the Christmas rally will carry through most of December.
In summary: I am bullish short-term and 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) remained #1, but it was today’s worst
performer down 2.2%. Is its momentum failing too?
I may look at a rate of change analysis on my momentum
indicator. Potentially this could catch
shifts faster, but it will take a lot of work to tune such a system and back test
it to prove its worth.
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
Intel (INTC) and Walmart (WMT) are essentially tied for 1st
today.
Avoid GE, Merck, United Technologies 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…
Intel is down 3% since I bought it 31 Oct 2017. This is a risk of a momentum strategy. The
hottest stock can get identified after an earnings surprise and the stock has
already moved. The momentum then slows
and profit taking follows. I am going to
hold Intel because I think buying will pick up again if they are able to keep up
earnings growth. In addition its PE is a low 15.4. vs the average DOW PE of 25
as of the end of October. The Yield on the S&P 500 (SPY) is 1.9% while the
Dividend for Intel is 2.3%. I think it is worth holding.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
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
were Positive on the market. (Market Internals are based on a package of
internals and all must be positive to create a positive indication.
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, Price was positive; Sentiment, 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.
