Thursday, February 8, 2018

Jobless Claims … Stock Market Analysis … ETF Trading … Dow 30 Ranking

JOBLESS CLAIMS (Reuters)
“The number of Americans filing for unemployment benefits unexpectedly fell last week, dropping to its lowest level in nearly 45 years as the labor market tightened further, bolstering expectations of faster wage growth this year…Initial claims for state unemployment benefits decreased 9,000 to a seasonally adjusted 221,000 for the week ended Feb. 3…” Story at…
 
MARKET REPORT / ANALYSIS         
-Thursday the S&P 500 dropped 3.75% to 2581.
-VIX jumped about 21% to 33.46. (XIV has blown up and should not be traded; it fell another 20% to 5.1. That’s down 95% in less than 5-days. Some trade huh?)
-The yield on the 10-year Treasury was little changed at a high 2.826%.
 
- My sum of 17 Indicators improved from -10 to -8 today. (A “-” number means that most indicators are bearish.) It’s good to see some improvement, but smoothed versions of this indicator (designed to avoid the daily fluctuation) indicate that the sum of indicators remains sharply bearish. But really, the indicators are not that important at this point.
 
Now we need to observe the data as the Index falls and watch especially for falling volume. Currently, volume is actually increasing as the Index has declined suggesting that investors remain concerned and selling is increasing. Until we see less volume, selling is likely to continue.
 
We can’t say how much further the S&P 500 may fall, but there will probably be a retest of today’s low of 2581 before this correction ends. There is still a lot of fear. I suggested early on that a test of the 200-dMA seemed likely.  The Index is now only 1.7% above the 200-day. Perhaps the Index will hold around 2540 (the 200-day). We’ll see. The “average” of 8-corrections since 2009 (excluding the 2009 crash) has lasted about 50-trading days and bottomed with a 12% loss, top to bottom. The shortest was 20-trading days long; the longest was 108. Thursday was day-10; Thursday the S&P 500 was down 10.2% from the top.
 
I am bearish short-term…isn’t everybody? Well, "No." So far, there still aren't too many bears. We need to see more bears before we'll know we getting closer to a bottom.
 
Longer term, my long-term indicator remained negative, but since I have already dropped stock holdings to 40% I am not planning to make further changes now. If the market recovers while Indicators remain negative, I’ll be a seller again. (The longer-term indicator is probably not as long term as we might like.  It calls a top, but it probably doesn’t differentiate between corrections and bear markets. For now, I’d need to see the 150-dMA in Breadth (%-advancing stocks on the NYSE) fall below 50% before I’d be concerned that a crash is in the works. Another high-volume day would be a worry too. For now, I don’t think we are facing a full-blown bear market, but that is mostly a guess.
 
TODAY’S RANKING OF  15 ETFs (Ranked Daily)
In corrections this chart may be less valuable – all stocks are falling.
 
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%. 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 while the S&P 500 was up 18%.
*For additional background on the ETF ranking system see NTSM Page at…
 
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
In corrections this chart may be less valuable – all stocks are falling.
 
The top ranked stock receives 100%. The rest are then ranked based on their momentum relative to the leading stock.
*I rank the Dow 30 similarly to the ETF ranking system. For more details, see NTSM Page at…
 
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained Neutral on the market.
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                                                        
Thursday, Sentiment, Volume and VIX Indicators were negative; Price remained neutral. My system is designed to call tops and bottoms, but I don’t know how far the market may fall once we  have a sell-signal. While the model currently says sell; that may not be the best move since we are already down 10%.
  
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I shifted to a conservative 40% invested in stocks and 60% in cash on 31 Jan. For the TSP, that would be 40% in the S&P 500 Index fund (C-Fund) with the remainder 60% G-Fund (Government securities) on 31 Jan.