“Underlying U.S. consumer prices recorded their largest
increase in 11 months in December on strong gains in the cost of rental
accommodation and healthcare, bolstering expectations that inflation will
accelerate this year.” Story at… https://www.reuters.com/article/us-usa-economy/rising-rents-healthcare-costs-boost-underlying-u-s-inflation-idUSKBN1F11QD
RETAIL SALES (Dallas News)
“The final numbers are in, and the past holiday season
was indeed one of the best since the last recession -- even if everyone didn't
partake in the good fortune.Sales rose 5.5 percent to $691.9 billion during November
and December…” Story at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up about 0.7% to 2786.
-VIX was up about 3% to 10.16.
-The yield on the 10-year Treasury was little changed at
2.549%.
There are a number of extremes in the market now.
-The S&P 500 Index is outpacing Utilities by 20% over
the previous 2-months. Perhaps it is due to the expectation that interest rates
will rise along with market euphoria, but this number is nearly double what we
have seen at any time in the last 5-years and is worrisome.
-RSI and Bollinger Bands are once again giving sell
signals. Bollinger Bands are set 2
standard deviations above the mean so it’s an indication that markets are
stretched.
-The S&P 500 Index is 11.5% above its 200-dMA and
that’s a sign of a stretched market too.
-The Index is also 5.2% above the 50-dMA. You need to go
back almost 2-years to find a higher number.
-Sentiment is high too, although it has dropped from its
bearish high of 88% bulls last week down to 78% bulls yesterday.
In spite of the topping indicators the markets can still
go higher. As a reminder, we have seen these topping indicators before without
an immediate top – or in some cases only a drop of a couple percent. That’s hardly a “Top”. We can conclude, the
odds of a top soon are higher – but not certain by any means.
My sum of 17 Indicators slipped from +9 to +8 today. On a
10-day basis, values were higher. A “+” number means that most indicators are
bullish. This isn’t an all-clear though; conditions always look good at a top.
I am bearish short-term; longer term I am a bull; but we
are due for a correction in 2018 due to Presidential election cycle history. I still wouldn’t short this market – there
are too many buyers. We’ve gone straight up, and a surprising number of people
think this market is going much higher.
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…
Energy (XLE) was #1. The markets are due for some
reversion so perhaps I’ll get a better buying opportunity later. I’ll wait before adding any positions. (I
hold XLK, DVY and SPY. DVY is a dividend play. SPY is a good core holding.)
Under my system in 2017, Technology (XLK) was ranked in
the top 3 Momentum Plays for 52% of all trading days in 2017 (if I counted
correctly.) XLK was up 35% on the year.
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 remained #1.
I’m waiting for a better entry point before adding other
positions.
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 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
Friday, Price and Volume indicators were positive; Sentiment &
VIX indicators were neutral. This adds up to a BUY indication, but at this
point a BUY signal is meaningless. The
NTSM system is designed to issue BUY signals near a Bottom as conditions rapidly
improve. Now, it is just an indication
that the market is doing well. The NTSM
long-term signal can sometimes signal BUY at the top if conditions are too good.
The last actionable Buy signal was on 15 November 2016.
With VIX recently below 10 for
a couple of days each month from May thru December 2017, and now January 2018,
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. VIX below 10 last occurred about 4-months before the year
2007 crash and also several months before the 2001 crash. 6-months with VIX
below 10 is unprecedented in the last 20-years.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I remain FULLY
INVESTED. 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.
