“The cost of living in the U.S. rose for a fourth
straight month, adding to signs that inflation is approaching the Federal
Reserve’s goal. The consumer-price index climbed 0.2 percent in November…”
Story at…
JOBLESS CLAIMS (MarketWatch)
“The number of Americans who applied for unemployment
benefits in early December fell by 4,000 to 254,000, reflecting the extremely
low level of layoffs taking place in the economy.” Story at…
PHILADELPHIA FED (Business Insider)
“The Philadelphia Fed's Manufacturing Business
Outlook survey came in at 21.5 for December, making for the best print
since November 2014.” Story at…
EMPIRE MANUFACTURING
The Empire State index, meanwhile, rose to a reading of 9
from 1.5 in November, the New York Fed said Thursday.” Story at…
My cmt: Readings above zero indicate expansion. Both the Philly Fed and the Empire Manufacturing
report came in much better than expected. With inflation increasing up we may
have to worry about an overheating economy soon.
MARKET REPORT / ANALYSIS
-Thursday the S&P 500 was up about 0.4% to 2262 at
the close.
-VIX fell about 3% to 12.79 at the close.
-The yield on the 10-year Treasury rose to 2.58%.
After a run-up in the morning, there was selling in the
afternoon; but at about 2PM, buying kicked in so I chose not to add to shorts. Perhaps there are enough dip-buyers to push
the markets a little higher Friday. Markets seem to be bullish on Friday’s since
some traders don’t like to hold shorts over the weekend. (To cover shorts they
need to buy.)
New-High/New-low data was already bad, but it
deteriorated further Thursday and this suggests further downside ahead; there
are plenty of other bearish signs.
Bearish Signs:
-Advancing volume remained down.
-Money Trend is now bearish
-The Sum of 16 Indicators improved slightly, but the
smoothed multi-day number remains down.
-The smoothed %-advancing stocks turned back up today,
but now it is too strong since the advance-decline ratio is again signaling
overbought.
-The Top Indicator is still signaling a top.
-New-High/New-low data is pointing down and got worse
today. New-lows increased and the spread (new-high minus new-low) was only +1.
That’s definitely bearish given the decline from nearly +500 just 5-days ago.
-XLI (cyclical industrials) is underperforming the
S&P 500 over the last month.
-The Index remains close to the upper Bollinger Band and
RSI was a sell a few days ago.
-Tick (sum of last trades up or down) was a big -425
Bullish Signs:
-The size of up-moves has been larger than the down-moves
over the last month, but that is a slow signal.
-My modified on-balance-volume in positive. This reflects bullish momentum over the past
2-weeks.
Neutral: Late day buying/selling is neutral.
Overall, the signals suggest a short-term top.
Long-term I’m fully invested at 50% in stocks (a conservative-retiree
allocation). The long-term trend remains
up.
TRADING PORTFOLIO (Small-% of the total portfolio)*
Financial Select Sector SPDR ETF (XLF) Est. 1 Dec.
2x Short S&P 500 (SDS): Established 6 Dec.
NET: +7.0%
*I am not really happy doing this much trading, but I
need to rebuild the trading balance after holding my shorts too long after the
February correction. (I really should
follow my own indicators. My system is smarter than I am!)
CURRENT RANKING OF 11 ETFs (Ranked Daily)*
#1 RANK for the past 28-days: Financial Select Sector
SPDR ETF (XLF).
#2 RANK: iShares Russell 2000 – Small Cap (IWM)
#3 RANK: Energy Select Sector SPDR ETF (XLE)
*For
background on the ETF ranking system see NTSM Page at…
This system is a momentum methodology that looks at
current price relative to past prices and picks a winner each day. I noticed
that the gain over the last 10-days or so has been greater for the IWM than the
XLF. That makes me wonder whether the
system should be refined by looking at how fast the various ETFs are
appreciating. I’ll keep that thought in
mind when I have some time for refinement.
THURSDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks
advancing (NYSE): 55.7%. (53.9% yesterday.) A number above 50% is usually
BULLISH for the markets short-term.
-150-day moving average of advancing stocks: 52.8%. (A
value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: Rose from -15 to 0 (percentage
calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +1 (It
was +34 yesterday.)
-10-day moving average of the change in spread: -12. In
other words, over the last 10-days, on average, the spread has decreased by 12
each day.
Market Internals
switched to 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 the Sentiment and VIX indicators were neutral.
The Price and Volume indicators were positive. Overall the long-term indicator
switched to BUY. The important buy-signal was last August and September. The buy-signal now just reflects that market
conditions have been positive recently.
Since I think the market is near a short-term top, I don’t see this as a
good time to buy.
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) Friday, 23 Sep 2016 in my long-term
accounts.
Remainder is 50% G-Fund. This is a conservative retiree allocation.
