MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was up about 0.8% to 2696.
-VIX was down about 12% to 9.77.
-The yield on the 10-year Treasury was little changed at
2.463%.
Utilities are underperforming the S&P 500 by an
extreme amount – this is a negative sign, but it is not a great timing indicator
since it could be months before we get a drop. The last time the spread was
this negative it marked a top followed by a small drop. The time before that (in Aug of 2016) there
was a 5% drop. In Feb 2016 it marked a top followed by a 13% drop. In March of
2015 there was another signal equal to the one we see now and the markets were
range bound for 6-months before an 11% correction took hold. So three of the four signals in recent years have been timely; in 2015 it was not. This indicator is
not in my summary of 17-indicators, but perhaps it should be.
There are other topping indicators that are also stretched:
The S&P 500 is 8.5% above its 200-day moving average. RSI and Bollinger
Bands are also stretched. None of these three indicators are extreme enough to give
sell signals - yet.
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.
My sum of 17 Indicators improved from +4 to +6. On a
10-day basis, values moved up again. A “+” number means that most indicators
are bullish – perhaps too bullish. Volume picked up a little to about 75% of
the norm for the month.
In the near term I am mildly bullish; 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 the year (if I counted
correctly.) XLK is up 35% year to date. Its weighted Average PE is 23.7.
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 hold Intel – 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…
TUESDAY 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
Tuesday, Price indicator was positive; Sentiment was negative;
Volume & VIX indicators were neutral. With VIX recently below 10 for a couple of
days in May, June, July, August, September, October, November and 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. VIX below 10 last occurred about 4-months before the year 2007 crash and
also several months before the 2001 crash.
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.
