“…the number of people filing for unemployment benefits
fell to a near 44-1/2-year low last week, offering further evidence that the
labor market was tightening despite hurricane-related disruptions in September.”
Story at…
WHAT 10x REVENUE MEANS (The Felder Report)
“At 10 times revenues, to give you a 10-year payback, I
have to pay you 100% of revenues for 10 straight years in dividends. That
assumes I can get that by my shareholders. That assumes I have zero cost of
goods sold, which is very hard for a computer company. That assumes zero
expenses, which is really hard with 39,000 employees. That assumes I pay no
taxes, which is very hard. And that assumes you pay no taxes on your dividends,
which is kind of illegal. And that assumes with zero R&D for the next 10
years, I can maintain the current revenue run rate. Now, having done that,
would any of you like to buy my stock at $64? Do you realize how ridiculous
those basic assumptions are? You don’t need any transparency. You don’t need
any footnotes. What were you thinking?” – Scott McNeely, Sun Micro Systems,
year 2002. From the Felder Report at…
My cmt: Felder points out that there are now 29 Stocks
trading at 10x revenue. At the top of
the Dot Com bubble there were 28.
ROACH MOTEL (Real Investment Advice)
“There are good companies
with bad stocks and bad stocks of good companies. What we lay out here is not
an indictment of specific companies but a reality check on stock valuations.
This analysis highlights a host of companies that appear to have prices that
are well above a fair fundamental value.” Commentary at…
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 was up a half point to 2580.
-VIX was down about 3% to 9.93.
-The yield on the 10-year Treasury slipped to 2.35%.
We saw strong late-day buying with only a slight selloff
at the close. Advancers were about equal to decliners, but advancing volume was
less than declining volume. Only 41% of volume was up on the day.
Total volume picked up, but the S&P 500 barely moved.
Volume has not been this high in about 6-weeks. I’ve seen a couple of ways to
interpret high daily-volume with little price change. Bulls will say a
high-volume day with little change in price validates the current price and is
bullish. Bears think that a high-volume
day with little change in price indicates transfer of stocks from strong hands
to weak ones – the smart money is selling to the dumb money - because the
action suggests strong demand and at the same time a desire to sell. That’s a “distribution
day” to the bears. Me? I don’t know. Total volume isn’t important; up-volume
is.
If I look at up-volume on a %-basis (I need to do this
more often) it is apparent that only 47% of the volume has been up over the
last 10-days when ignoring unchanged volume. So, we have 47% of the volume has
been up and only 49% of issues traded on the NYSE has been up over the last
10-days. Unless the numbers change, that’s
not a recipe for a bull move.
Smart money is falling and has been for several weeks. The
sum of 17-indicators is looking even more bearish long-term and it dropped from
-4 to -6 on the day today.
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…
A pullback in the range of 3-5% would be the norm.
Perhaps we’ll finally see a bigger (10% or more move down), but that is
anybody’s guess at this point. The
numbers suggest down; but the magnitude is unknown.
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) remained
#2 today and Financials (XLF) weren’t far behind.
I thought it would be interesting to apply the ETF
ranking system methodology to the Dow 30.
The quick way to do it was to keep the number of stocks the same as my
ETF ranking system so here is a ranking of 15 DOW stocks.
TODAY’S RANKING OF 15 DOW STOCKS (Ranked Daily)
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
As noted Friday 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. We’ll see.
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
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
Thursday,
Sentiment, Price, VIX & 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.
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.
