“Global equity
funds witnessed a $21bn flow of cash in the last week – the ninth highest on
record – as bullish stock investors pile into stocks in the wake of Donald
Trump’s election, according to data analyzed by Bank of America Merrill Lynch.”
– Financial Times
“It’s important to know that money does not flow into
stock or bonds. Nor does money flow out of stocks and bonds. Given there is a
seller for every buyer there cannot be a flow. Equity funds can have a “flow”
so to speak, but there is no net flow. The alleged amount of cash on the
sidelines does not change one bit. On an overall basis, it is impossible to
dump stocks for bonds or cash but one can do that on an individual basis. What
is it that retail traders know that those on the other side of the trade don’t
know? [The flow into stock equity funds] … is a strong contrary indicator.” –
Mish Shedlock. Commentary at…
My cmt: Mike is saying that the “smart money” is selling
to retail investors who are late to the party.
GREATER FOOL THEORY SAYS “TIME TO SELL?” (Real Investment
Advice)
“With markets trading at extremes, bullish exuberance at
peaks and monetary policy tightening – this might be a good time to locate
one of those “greater fools” to sell to. Of course, this is just the
opposite of what the media is telling you to do currently.” – Lance Roberts commentary
at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was up about 0.4% to 2271 at the
close.
-VIX fell about 2% to 11.45 at the close.
-The yield on the 10-year Treasury rose to 2.57%.
Rather than listing bearish and bullish signs I think
I’ll just say, “Ditto yesterday.” If
anything, indicators were worse today. A
lot of what I do is market internals based; as the index goes higher and the
internals deteriorate, indicators are stretched from both directions. In the end though, the index can go higher as
investors toss out normal metrics in what continues to be a buying panic. It does appear to be slowing, at least from a
volume perspective. This doesn’t mean
that the index can’t go higher though; in fact that is what usually happens
over the holidays because low volume rallies are common.
I am making money in the long-term portfolio and losing
less in the short-term portfolio. The
object of the trading portfolio is to make some cash with the cash part of the
overall portfolio - that strategy is questionable right now. I haven’t done well shorting so I will
tighten my short-rules for the future.
The signals still suggest a short-term top. 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)*
2x Short S&P 500 (SDS): Established 6 Dec.
2x Short S&P 500 (SDS): Established 16 Dec.
NET: +8.7%
*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!)
I may cut my short position (SDS-ETF)
in half just to limit losses on the possibility this up-trend continues thru
the Holidays. I must say VIX is
beginning to look attractive (below 12), but my “calm-before-the-storm
indicator is not giving a buy signal for the VIX so I’ll hold off for now.
CURRENT RANKING OF 11 ETFs (Ranked Daily)*
#1 RANK for the past 29-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…
XLF was the biggest gainer today; naturally, after I sold
it. I expect a pause so I’ll get back
into the top ETF after the New Year.
TUESDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks
advancing (NYSE): 54.2%. (54.9% 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 +42 to +73 (percentage
calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +171
(It was +82 yesterday.)
-10-day moving average of the change in spread: -8. In
other words, over the last 10-days, on average, the spread has decreased by 8
each day.
Market Internals remained
NEGATIVE 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
Tuesday the Sentiment, Price and VIX indicators were
neutral. The Volume indicator was positive. Overall the long-term indicator remained
HOLD.
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.
