“U.S. home sales increased more than expected in
November, hitting their highest level in nearly 11 years, the latest indication
that housing was regaining momentum after almost stalling this year.” Story at…
CRUDE INVENTORIES (Oilprice.com)
“The Energy Information Administration reported yet
another inventory draw for last week, making it the fifth one in a row with
falling inventories. The authority said inventories had
gone down by 6.5 million barrels, to 436.5 million barrels.” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was down about 0.1% to 2679.
-VIX was down about 3% to 9.75.
-The yield on the 10-year Treasury rose to 2.499%.
VIX is again below 10. This is extraordinary number that
occurs rarely. In short, complacency abounds. We have seen closes below 10 on
the VIX for the past 8 months (May, June, July, August, September, October,
November and now December). The last time VIX dropped below 10 (other than the
past 8-months) was in January 2007 and the markets crashed 6-months later. My take is that the closes below 10 in
November 2006 thru January of 2007 foretold of massive complacency that set the
stage for the crash that followed. We have now seen a number of VIX closes
below 10 in May thru December 2017. VIX at this level is an important sign
that a decent correction (or worse) is coming. We just don’t know when. From here, we should be very wary and pay
close attention to the markets.
My sum of 17 Indicators improved remained unchanged at +8
on the day. There was, however, continued strong improvement on a 10-day basis
from +3 yesterday to +13 today. The 10-day number just means that conditions
are better now than they were 2-weeks ago.
Repeating prior comments…
We are due for a stall or pullback of some kind – we’ll
see. I’m not seeing too many negative indicators, but there are a number of
indicators that are close to turning negative (RSI, Bollinger Bands, Breadth
compared to the S&P 500, Index above the 200-dMA). Perhaps profit taking in
the new-year will start some real selling. For now, there are few signs of an
impending disaster (or even a slowdown in buying) so I’ll go with the flow.
Smart Money (based on late day action) is neutral so the
Pros aren’t sure either.
In the near term I am mildly bullish; longer term I am
a bull, but I recommend caution with the Fed raising rates and shrinking
its balance sheet. This party could end sometime 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) were #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. DVY is a dividend play. SPY is a good core holding.)
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 first
place in the last few days, but today Intel slipped into #1 after another huge
day up (1% up on an otherwise mostly down day). (I hold Intel – I’m waiting for
a better entry point before adding other positions.)
Avoid GE, IBM 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…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
Positive 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
Wednesday, Price indicator was positive; Sentiment, Volume & VIX
indicators were neutral. Price was too positive; it is so high that it is now a
worrisome sign. 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.
