“The Institute for Supply Management's manufacturing
survey index out Wednesday rose to 59.7 from November's 58.2, as the factory
sector's run of strong growth showed no sign of letting up.” Story at…
CONSTRUCTION SPENDING (USA Today)
“U.S. builders spent 0.8% more on construction projects
in November, the fourth consecutive monthly gain…The increase brought total
construction spending for the month to a seasonally-adjusted annual rate of
$1.26 trillion, an all-time high.
FOMC MINUTES (Reuters)
“Most participants reiterated their support for
continuing a gradual approach to raising the target range, noting that this
approach helped to balance risks to the outlook for economic activity and
inflation,” the Fed said in the minutes.” Story at…
AUTO SALES (USA Today)
“The industry fell short of 2016's record 17.6 million
vehicles sold, as well as 2015's previous record of 17.5 million. The industry
is cooling off as Americans are keeping high-quality, recently purchased
vehicles longer.” Story at…
REGRESSION TO TREND CONTINUES TO WARN OF TROUBLE (Advisor
Perspectives)
My cmt: I added a trend line in red to the lower “Variance
from Trend” graph at the bottom of the above chart. It seems to suggest we may
get above 150% variance before a significant downturn.
Just my guess, but I think we could see a correction
anytime, assuming indicators don’t go up forever.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was up about 0.6% to 2713.
-VIX was down about 6% to 9.15.
-The yield on the 10-year Treasury slipped to 2.4454%.
Topping indicators remain stretched: The S&P 500 is 9.2%
above its 200-day moving average. (Sell signal would be in the 10-15% range.) RSI
and Bollinger Bands are also stretched. None of the topping indicators are
extreme enough to give sell signals; except for Breadth vs. S&P 500 which
was negative around Christmas. It has since gone neutral.
Again, today was statistically significant. That just
means that the price-volume move up exceeded statistical parameters that I
track. The stats show that about 60% of the time a statistically significant
move up will be followed by a down day the next day. I think the move needs to
be greater than 1% to give a good signal.
My sum of 17 Indicators declined from +6 to +0 today. On
a 10-day basis, values dipped too. A “+” number means that most indicators are
bullish. At 0, indicators were neutral at today’s close.
I suspect if we see a >1% up-day, it is likely to
signal a short-term top if a few other topping indicators (RSI, Bollinger Bands
or % above 200-dMA) join in with sell signals.
I am neutral short-term; 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; further, historically we are due for a
correction in 2018 due to the Presidential election cycle.
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
*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. Its weighted Average PE is 23.7.
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
Caterpillar remained #1. (I hold Intel – I’m waiting for
a better entry point before adding other positions. At this point, Intel is a value play.)
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. Internals deteriorated
today on a 10-day basis. (Translation: Internals are worse than they were
10-days ago.)
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.
