“Consumer sentiment jumped in early December as Americans
equated Donald Trump’s surprise election victory with policies that would buoy
economic growth. The University of Michigan's gauge surged 4.5% to 98.0,
one-tenth of a percent shy of the recovery cycle high touched in 2015…” Story
at…
WHAT HAPPENS IF TRUMP PULLS THE U.S. OUT OF THE PARIS AGREEMENT?
(MishTalk)
“Even if the US abandoned the deal it would have a
limited direct impact on the overall G20 effort. If all other countries stayed
on track to meet their carbon targets, but the US returned to business as
usual, the average annual cut for the G20 as a whole would only fall slightly,
from 3 per cent to 2.8 per cent…“The impact on the global emissions projection
is pretty small even if the US shelves its Paris target,” said Jonathan Grant,
a director of climate and sustainability at PwC.” – Commentary from Mish
Shedlock at…
CARRIER (Real Investment Advice)
“When people say they are upset about trade, I think that
what really bothers them is that automation is allowing us to produce 85%
more manufactured goods with far fewer workers. That transition has been
painful for many workers, but it’s not about trade—except in one respect…even
within a given industry, such as steel, the job loss is overwhelmingly about
automation, not trade…The “Carrier” deal, and future deals like it,
only succeed in temporarily keeping the jobs of yesterday with a cost to
taxpayers today.” Commentary at…
CORPORATE EQUITY AT EXTREMES (Jesse Felder)
“During the first quarter of 2000, the dotcom bubble
famously peaked after setting a new record high for corporate equity
valuations. Today, we haven’t quite matched that record in terms of equities,
though, by some measures, we are very close. And when you look at corporate
valuations more comprehensively, including both debt and equity, we actually
have now matched that prior period.” Commentary at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up about 0.6% to 2260 at the
close.
-VIX dropped about 7% to 11.75 at the close.
-The yield on the 10-year Treasury jumped up to 2.46%.
My most reliable top-indicator measures the divergence
between the S&P 500 and a measure of market internals. Today that
divergence reached an extreme last seen at the market top on 2 August of 2013. That was the start of a quick 4.5% pullback; I
expect something similar soon. As was the case in 2013, RSI is now overbought
with an 80 reading Friday. There is an additional strong bearish sign now that
wasn’t present in August 2013 - Bollinger Bands are also signaling
“overbought.” Other bearish signs are evident too.
There has been late-day buying recently and that would
seem to be bullish, but the percentages are turning down; in other words
late-day buying hasn’t kept up with buying earlier in the day and that suggests
a turn down is coming sooner rather than later.
S&P 500 is 4.4% above its 50-dMA and that suggests a
pullback. A number in the 3-3.5% range usually
signals trouble.
We saw an important crack in the Bull-run appear Friday:
declining stocks outnumbered advancing stocks for the day. That usually (but
not always) leads to a down-day on the following trading-day since “the
majority rules.” The numbers were not extreme Friday, so it may not signal anything
yet – we’ll have to see if the trend continues.
Still, it is possible that this buying mania will
continue so I sold my VXX position for a loss very late Friday because VXX is
highly volatile and I wanted to reduce some risk.
As you might imagine, the market’s push higher is giving some
bullish indicators. The daily sum of indicators slipped to +3 from +8, but
smoothed values crept up slightly – a somewhat bullish indication. “Money
Trend” remains solidly up, but that’s not a surprise given the dramatic rise in
the S&P 500. (This indicator is informative when it diverges from the
Index.)
Still, I am negative in the short run. It looks like a 5%
pullback is overdue to me.
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.
Long Volatility ETF (VXX): Established 7 Dec. SOLD 9 Dec.
Loss: -1.2%
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 23-days: Financial Select Sector
SPDR ETF (XLF).
#2 RANK: iShares Russell 2000 – Small Cap (IWM) (IWM moved up.)
#3 RANK: iShares
U.S. Aerospace & Defense ETF (ITA) (ITA
dropped down.)
*For background on the ETF ranking system see NTSM Page
at…
FRIDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks
advancing (NYSE): 54.5%. (56.1% yesterday.) A number above 50% is usually BULLISH
for the markets short-term.
-150-day moving average of advancing stocks: remained
52.9%. (A value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: Slipped from 188 to 155 (percentage
calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +317 (It was +470 yesterday.)
-10-day moving average of the change in spread: +11. In
other words, over the last 10-days, on average, the spread has increased by 11
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 Volume indicators were neutral.
The Price and VIX 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 are good now. 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.
