Thursday, November 16, 2017

Jobless Claims … Philadelphia FED … Industrial Production … Stock Market Analysis … ETF Trading … Dow 30 Ranking

JOBLESS CLAIMS (FoxBusiness)
“The number of Americans filing new applications for unemployment benefits rose for the second straight week, but remained near historically low levels. Initial jobless claims, a proxy for layoffs across the U.S., increased 10,000 to a seasonally adjusted 249,000 in the week ended Nov. 11…” Story at…
 
PHILLY FED (RTTnews)
“Growth in Philadelphia-area manufacturing activity slowed by more than expected in the month of November, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday… its diffusion index for current manufacturing activity in the region dropped to 22.7 in November…”  Story at…
My cmt: A number above zero indicates expansion so manufacturing is still growing – just at a slower rate.
 
INDUSTRIAL PRODUCTION (Reuters)
“U.S. industrial production recorded its biggest increase in six months in October as the drag from hurricane-related disruptions unwound, but the underlying growth trend in output at the nation’s factories, mines and utility plants remained moderate.” Story at…
 
HIGH DOWNSIDE RISK or “Would you Rather be a Bear.” (Real Investment Advice)
“I see downside market risk at about four times the upside reward. I don’t believe stocks are a buy on a minor dip — a view adopted by most. Given the outlook that there is outsize risk, I have been steadily expanding my large net short exposure.” – Doug Kass, President of Seabreeze Partners Management, Inc. Commentary at….
 
MARKET REPORT / ANALYSIS         
-Thursday the S&P 500 was up about 0.8% to 2586.
-VIX was down about 10% to 11.76.
-The yield on the 10-year Treasury rose to 2.373%.
 
The move down yesterday in the S&P 500 was statistically significant (in my system) based on the standard deviation of the price-volume when compared to recent history (after the final volume data was tabulated last night). That was followed by another statistically significant up-day today.  That means that tomorrow (Friday) is likely to be down about 60% of the time. I think we may see some more buying for another day or two, but we shall see. Overall, I think conditions remain negative enough to warrant a bearish prediction in the short run. More dip buyers were bound to move in and we saw that today and it is indicated in the Sentiment readings.
 
Sentiment (measured as %-Bulls [Bulls/{bulls+bears}] based on the amounts invested in Rydex/Guggenheim mutual funds) is now 83% bulls.  That’s a very high number that is cause for concern though it is not yet a “sell”. The dippers may drive it into sell territory soon if they keep buying.
 
Market Internals improved to neutral today based on improvements in the new-high/new-low data, but the sum of 17-indicators continues down and the late day action was mostly down indicating hesitation by traders to bet that the dip is over. Over the last 2-weeks the trend has been “late-day selling”.
 
I remain bearish short-term. At this point, it still looks like we’ll see some downside ahead, but one is never sure these days. The markets have defied the shorts for some time.
 
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) remained #1. Utilities (XLU) was #3.  That isn’t a great sign for the markets.  Utilities are often a safe-haven during market stress.
 
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) remained #1 today. I have owned Intel for some time – I bought more Halloween, 10/31/2017. Avoid GE, IBM, Merck, United Technologies, Verizon 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.
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
 
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals were 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                                                        
Thursday, 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.