“…our cautious stance on stocks for the past six weeks
has proven wrong, although we still have found some names to buy despite our
near-term cautious stance. Of course such short-term “trading calls” are just
that – trading calls – all within the context of a secular bull market that has
YEARS left to run. [My cmt: I’m guessing we see an end in 2018, but this isn’t my
commentary…back to Raymond James.]
The call for this week: I went back and studied my notes
dating back to the 1960s and after ALL the rallies like we have seen since the
November presidential election (the runaway rally that we called), most of the
gains have been given back in a “selling stampede.” Not that we are predicting
an end to the secular bull market, for we are not, but there is NO exception to
the subsequent outcome. The only time stocks have not suffered such an outcome
has been at the start of a huge up move. Obviously, we are not at the start of
a huge up move.” Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was up about 0.1% to 2591.
-VIX was up about 3% to 9.4.
-The yield on the 10-year Treasury slipped to 2.325%.
Today the markets broke a recent trend of new highs on
the Index while internals deteriorated, although today’s internals were worse
than those at the new high on 7 Oct. The big change is that the % of stocks advancing
over the last 10-days on the NYSE is above 50%, based on today’s numbers, and
that’s a good sign for the bulls. Not all was rosy however; a very bearish sign popped up today. There have been only
4 down-days in the last 20-trading days.
That’s usually a bad sign, but we saw this bear sign 6-days in October
without a market hiccup so perhaps this time is different.
Smart money (late-day action) was down today and it is
falling on a 10-day basis and has been for several weeks. The sum of
17-indicators is looking bearish long-term even though it was up to -3 from -6 on
the day today. (A minus number indicates
that more indicators are bearish than bullish.
I’m beginning to sound like a broken record with repeated
suggestions of a pullback of some kind. It may take another big up-day, say in
the range of a 1% advance on the day before the markets will make a clear top.
At that point we’ll gain more confidence in a pullback.
I still think down is more likely than up, but we’ll see.
See Friday’s blog post for more thoughts on the Markets – they haven’t changed
much. Friday’s Blog post is here…
Numbers are a bit more mixed so I am less confident in my
negative short-term call.
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; Aerospace and Defense (ITA) moved
back into #2 today. It‘s time to buy XLK, especially if we get a dip.
TODAY’S RANKING OF 15 DOW STOCKS (Ranked Daily)
I’ll get around to expanding this to the Dow 30
eventually. It’s a lot of work to set it up and load the data.
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 15 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 break down soon 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
MONDAY 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
Monday, Sentiment,
Price, VIX & Volume indicators were neutral, but the Price indicator
continues to slip down. 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.
