“U.S. homebuilding fell more than expected in November,
tumbling from a nine-year high as construction activity declined broadly, which
could prompt further downward revisions to fourth-quarter economic growth
estimates. Groundbreaking on new housing projects dropped 18.7 percent…” Story
at…
My cmt: Higher interest rates.
THE FED IS TILTING AT WINDMILLS (Jesse Felder’s Tumblr)
“Fed history[:] … It was created after the banking panic
of 1907 to address the liquidity needs of banks amidst a bank run and, in this
way, to improve overall financial stability. The greatest irony of this fact
today is that in recent years they have managed to accomplish just the opposite
of their original mandate…this pattern of growing financial bubbles with
growing consequences has not reversed; it has only grown stronger. Today’s
unprecedented and extreme policies being implemented by central banks around
the world will lead to unprecedented and extreme problems.” – Jesse Felder.
Commentary at…
My cmt: As Felder notes, the so called dual mandate,
‘promoting maximum employment and stable prices’ is impossible and ultimately
destructive. We simply don’t know when the chickens will come home to roost.
RUSSELL 2000 (Real Investment Advice)
“Over the last five years, the R2K’s aggregate annual net
income has shrunk from $33.6 billion to $9.7 billion, a 73% decline…83% of the
R2K’s earnings growth over the last five years is from one sector,
financials. Exclude financial companies from the index, aggregate
earnings have been negative in each of the last two years... the R2K index is
trading at grossly elevated levels. Owning the index for anything other than pure
speculative trading is ridiculous. Owning the index for its bank exposure is
insane.” – Michael Lebowitz, CFA. Commentary at…
RISK FREE RETURN EXCEEDS STOCK RETURN (SafeHaven)
“The quantitative fact, and not the story, is what
matters: stocks now no longer offer an expectation of return in excess of the
risk-free return [TIPS]…For a while, the argument for stocks was ‘sure, they're
expensive, but with yields this low they are still relatively better.’ They're
no longer even relatively better.” – Michael Ashton. Commentary
at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was down about 0.2% to 2258 at
the close.
-VIX fell about 5% to 12.20 at the close.
-The yield on the 10-year Treasury rose to 2.6%.
The volume in the first half-hour of trading this morning
was about 3-times normal on the options expiration day. The S&P 500 was less than 2-points
higher. One wonders whether this is a
case of the smart money taking profits and selling to the dip-buyers or was it
just an options related anomaly. By the end of the day volume finished about
50% higher than the monthly average.
Interest rates continue to rise. The 10-year was 1.4% last July; now it’s
2.6%. That’s a negative for the
multi-nationals.
The DJ Utility Average was one of the top performers
today so investors seem to think there’s trouble ahead. Perhaps they think the
Trump rally is over.
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 improved again today,
but now it is too strong since the advance-decline ratio is again signaling
overbought.
-The Top Indicator is still signaling a top.
-XLI (cyclical industrials) is underperforming the
S&P 500 over the last month and it continues to deteriorate relative to the
S&P 500.
-The Index remains close to the upper Bollinger Band and
RSI was a sell a week ago.
-The S&P 500 is 3.9% above its 50-dMA. Anything in a
range of 3-3.5% above the 50-day is bearish.
-Late day buying/selling has turned down and is giving a
bearish indication.
Bullish Signs:
-New-High/New-low data improved and is now bullish.
-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.
-Tick (sum of last trades up or down) was a big +413. The 10-dMA of Tick is 223 and that's a more neutral indication.
Overall, the signals suggest a short-term top, but we
actually saw a few more bullish signs Friday. I still expect to see the Index
fall 4-5% from its high.
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.
FRIDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks
advancing (NYSE): 55.8%. (55.7% yesterday.) A number above 50% is usually
BULLISH for the markets short-term.
-150-day moving average of advancing stocks: 52.6%. (A
value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: Rose from 0 to +13 (percentage
calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +84
(It was +1 yesterday.)
-10-day moving average of the change in spread: +8. In
other words, over the last 10-days, on average, the spread has increased by 8
each day.
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
Friday the Sentiment and VIX indicators were neutral. The
Price and Volume indicators were positive. Overall the long-term indicator remained
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. It is not unusual for the long-term indicator to be bullish
at a top.
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.
