- “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
EMPIRE MANUFACTURING
With more shipments and fewer new orders,
manufacturing slowed slightly in New York in December. The Federal Reserve Bank
of New York's Empire State Manufacturing index fell from 19.4 in November to 18
in December…” Story at…
INDUSTRIAL PRODUCTION (Reuters)
“U.S. industrial production rose less than expected in
November as a drop in utilities output offset a post-hurricane rebound in the
oil and gas industries and the third consecutive monthly advance for
manufacturing, the Federal Reserve said on Friday. Overall industrial output
rose 0.2 percent following an upwardly revised 1.2 percent gain in October.”
Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up about 0.9% to 2676.
-VIX was DOWN about 10% to 9.42.
-The yield on the 10-year Treasury was little changed at
2.353%.
My sum of 17 Indicators improved from -4 to 0 on the day,
but on a longer-term smoothed 10-day basis it continues to fall.
There were a lot of bullish improvements today, but it
was a triple witching (options expiration) day so we can’t put too much faith in
it. I am still leery of the advance in the S&P 500. We are due for a stall or pullback of some
kind – we’ll see. Perhaps profit taking in the new-year will start some real selling.
In the near term I am leaning neutral to bearish; longer
term I am a bull, but I recommend caution with the Fed raising rates and
shrinking its balance sheet. This party could end in 2018.
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…
Financials (XLF) remain #1. The markets look a bit
strained so perhaps I’ll get a better buying opportunity. I’ll wait before adding any positions. (I
hold XLK, DVY and SPY.)
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.
Caterpillar (CAT) and Boeing (BA) have been trading
places. BA is #1 today. (I hold Intel – Intel was the big winner on the Dow
today. It was up over 3%. I’m waiting for a better entry point before adding
other positions. Intel is a value play and not a good momentum buy at this
point.)
Avoid GE and Merck. 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…
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals
improved to Neutral 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
Friday, Price indicator was positive; Sentiment, Volume & VIX
indicators were neutral. Price was too positive and is so high that it is now a
negative. With VIX recently below 10 for a couple of days in May, June,
July, August, September, October, November and now December, 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.
