Friday, November 3, 2017

Payrolls … ISM Services … Factory Orders… Stock Market Analysis … ETF Trading … Dow 15 Ranking

PAYROLLS (Bloomberg)
“U.S. employers added the most workers in a year, rebounding from September’s slowdown, as people resumed work after hurricanes Harvey and Irma…Payrolls rose 261k (est. 313k) after 18k advance; revisions added 90k to Aug.-Sept. figures, including turning Sept. drop into a gain…” Story at…
 
ISM SERVICES (Fox Business)
“A broad gauge of U.S. economic activity ticked up in October to its highest level since August 2005. The Institute for Supply Management on Friday said its nonmanufacturing index rose to 60.1 in October from 59.8 in September.”  Story at… 
 
FACTORY ORDERS (CNBC/Reuters)
“New orders for U.S.-made goods rose for a second straight month in September…Factory goods orders increased 1.4 percent as demand for a range of goods rose, the Commerce Department said on Friday.” Story at…
 
MARKET REPORT / ANALYSIS         
-Friday the S&P 500 was up about 0.3% to 2588.
-VIX was down about 8% to 9.14. (Unbelievable! VIX almost broke below 9 today.)
-The yield on the 10-year Treasury slipped to 2.332%.
 
This will look similar to my comment on the 27 October, because the symptoms remain:
 
Running out of Gas:
-3.7% of stocks on the NYSE made new-highs today. At the prior all-time high on 27 October, 6.1% of stocks made new highs.
-The % of advancing stocks was 62% at the prior all-time high on 27 Oct. At today’s new all-time high, only 48% of stocks were advancing on the NYSE.
-Up volume was 57% of the total on 27 Oct.  Today it was 49%.
It’s not good to see numbers <50% for advancing shares and advancing volume, especially at a new high. Usually the Indices follow the smaller stocks, so I still expect some backsliding on the S&P 500.
 
Smart money (late-day action) was fairly flat today, but it is falling on a 10-day basis and has been for several weeks. The sum of 17-indicators is looking even more bearish long-term even though it was unchanged at -6 on the day today.  (A minus number indicates that more indicators are bearish than bullish.
 
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 #2; Aerospace and Defense (ITA) moved back into #1 today. Of course they did now that I sold ITA.
 
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
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
 
FRIDAY 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                                                        
Friday, 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 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.