Wednesday, January 10, 2018

Crude Inventories … Stock Market Analysis … ETF Trading … Dow 30 Ranking

CRUDE INVENTORIES (OilPrice.com)
“A day after API contributed to WTI’s reaching its highest price level since 2015 with an estimated 5-million-barrel draw in crude oil inventories, the EIA reinforced the bullish mood with its own draw, and a big one, of 7.4 million barrels for the last week of 2017.” Story at…
 
INTEL (CNBC)
(1)“Some of Intel's data center customers are exploring using microchips from its rivals to build new infrastructure after the discovery of security flaws affecting most chips” Story at…
Intel has said their chip flaw is shared by competitors and would have no material impact on their business – but apparently investors don’t agree. Interestingly, while AMD said their chips do not have the same flaws (others including Intel dispute this) here’s a story from Microsoft that says there are problems with AMD chips that haven’t been solved.
 
(2)“Microsoft said it had suspended patches to guard against Meltdown and Spectre security threats for computers running AMD chipsets.” Story at…
Overall, the big problem for Intel is that the issue will cause the biggest hit to the Intel server business where they have enjoyed a near monopoly. I was busy all day (out), but it’s time to sell.  My gut feeling is that Intel is at risk for another 10% loss…too much for me.
 
MARKET REPORT / ANALYSIS         
-Wednesday the S&P 500 was up about 0.2% to 2748.
-VIX was up about 3% to 9.52.
-The yield on the 10-year Treasury rose to 2.488%.
 
Only 2 of the ETFs that I track – Financials (XLF) and Nasdaq Biotech (IBB) – were up today. This doesn’t seem to be a healthy sign, but over the last 10-days, 70% of the ETFs have been up, so it is too early to get worked up.  Further, a number of signs that have been bearish have improved recently: Sentiment; Bollinger bands; and the RSI; Overbought/Oversold ratio are no longer giving sell signals.  This doesn’t mean we are out of the woods, but it may postpone a pullback.
 
My sum of 17 Indicators improved from +3 to +5 today. On a 10-day basis, values are still falling. A “+” number means that most indicators are bullish.
 
I am bearish short-term; longer term I am a bull, but I recommend caution with the Fed raising rates and shrinking its balance sheet. In addition, we are due for a correction in 2018 due to Presidential election cycle history.
 
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…
 
WEDNESDAY 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                                                        
Wednesday, Price indicator was positive; Sentiment was negative; Volume & VIX indicators were neutral.  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 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.