“A measure of U.S. factory activity fell more than
expected in November as a gauge of employment cooled, but the index continued
to point to strengthening manufacturing conditions. The Institute for Supply
Management (ISM) on Friday said its index of national factory activity slipped
to a reading of 58.2 last month from 58.7 in October.” Story at…
CONSTRUCTION SPENDING (FoxNews)
“U.S. construction spending surged 1.4 percent in
October, the best gain in five months, with all major categories of building
posting gains.” Story at…
AUTO SALES (USA Today)
“Solid but not spectacular U.S. auto sales in
November likely sealed the industry's fate: 2017 will almost surely mark the
first full-year sales decline since the Great Recession. But sales still remain
near 2016's record…” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was down about 0.2% to 2642.
-VIX was down about 1% to 11.43.
-The yield on the 10-year Treasury dipped to 2.362%.
My sum of 17 Indicators improved from +4 to +6 on the day
and improved from +9 to +17 on a 10-day basis. That’s is quite bullish.
On the Bearish side:
-Bollinger Bands remained “overbought.” That means the
Index is 2 standard deviations above its average over the last month. It has
actually surpassed it my more than we’ve seen in the past 2-years and that’s a
bearish sign.
-RSI is currently neutral, but is elevated.
-The Smart Money (late day action) is still headed down,
but it is hinting at a reversal up.
-The overbought/oversold ratio is now overbought, but
this indicator is traditionally early so it is not important.
My guess is that a short-term top is coming. Perhaps the
Christmas rally will carry through the second or third week of December.
In summary: I am mildly bullish short-term and 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…
Financials (XLF) Technology (XLK) and Aerospace and
Defense (ITA) were tied for #1. (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.
Walmart (WMT) and Intel (INTC) were tied at #1. (I hold
Intel.)
Avoid GE, Merck and Disney. 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…
Intel is down 1.4% since I bought it 31 Oct 2017. This is a risk of a momentum strategy. The
hottest stock can get identified after an earnings surprise and the stock has
already moved. The momentum then slows
and profit taking follows. I am going to
hold Intel because I think buying will pick up again if they are able to keep
up earnings growth. In addition, its PE is a low 15.4 vs the average DOW PE of
25 as of the end of October. The Yield on the S&P 500 (SPY) is 1.9% while
the Dividend for Intel is 2.3%. I think it is worth holding.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
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
were 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
Friday, Price indicator was positive; Sentiment, Volume & VIX
indicators were neutral. With VIX recently below 10 for a couple of
days in May, June, July, August, September, October and now November, 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 30 Nov and the last
actionable signal was a BUY (from a prior sell) on 15 November 2016. The 30 Nov Buy signal
is meaningless. The long-term system is
designed to signal a buy after a bottom and it is reasonably good in that
role. Now, near a top, it is just
another sign of too much of a good thing.
