“At present, the valuation measures that we find best
correlated with actual subsequent S&P 500 total returns are at the most
offensive levels in history, matching or eclipsing the 1929 and 2000 extremes.
Even considering the level of interest rates, economic growth, and other
factors, the S&P 500 currently stands about 2.8 times the level that we
believe the index will revisit over the completion of the current market cycle,
implying an interim market loss something on the order of -64%. Moreover, the
most reliable valuation
measures uniformly imply the likelihood of negative total returns in the
S&P 500 over the coming 10-12 year period.” – John Hussman, PhD. Commentary
at…
A BUDGETARY WRECKING BALL (The Hill.com)
“Fiscal conservatives on the right have lost a massive
amount of credibility based on the GOP budget they passed this year. After many
years of calling for a budget that cut spending, reformed entitlements,
controlled the debt and balanced the budget, they failed to enact even one of
those goals when they finally had a chance. Out of a possible $47 trillion in
spending over 10 years, the budget called for cutting an utterly pathetic $1
billion.” Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was up about 0.5% to 2690.
-VIX was up about 1% to 9.53.
-The yield on the 10-year Treasury rose to 2.400%.
My sum of 17 Indicators improved from 0 to +4 on the day,
but on a longer-term 10-day basis it continues to fall. The longer-term number
just means that conditions are worse now than they were 2-weeks ago.
Can this market go up forever? It sure seems like it! But,
as most know, too much of a good thing can be bad.
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. For
now, there are few signs of an impending disaster (or even a slowdown in
buying) so I’ll go with the flow.
In the near term I am leaning neutral to slightly 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 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…
Technology (XLK) hasn’t been the leader since the end of
November. Today it moved into #1. Financials (XLF) slipped to #2. 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 pure 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
places in the last few days. BA is again #1 today. (I hold Intel – Intel was
again the big winner on the Dow today. It is up almost 7% in the last 2-days.
I’m waiting for a better entry point before adding other positions. Intel is a
value play and may not be a great momentum buy at this point.)
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…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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
Monday, 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.
