The Trump rally is basically a "sucker's play".
The internals of this rally are sick and very selective; the McClellan Summation
Index is miles away from confirming it; the Dow Jones Industrials has far
exceeded the SPX, which has far exceeded the NASDAQ creating a case of an
inter-market bearish divergence. We also have a huge On-Balance-Volume
divergence.” – Brad Gudgeon.
WHAT THE CHARTS SAY (Real Investment Advice)
“The deviation of the S&P 500 from their respective
34-month moving average is at levels only seen prior to
corrections. Importantly, the current deviation is occurring in
conjunction with a sell signal which only existed in 2000 and 2007.” –
Lance Roberts
Chart and commentary at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was up about 0.7% to 2272 at the
close.
-VIX rose about 0.6% to 12.72 at the close. (Those
Options Boys remain concerned.)
-The yield on the 10-year Treasury remained 2.48%.
I remained short too long after the bottom last
February. In that instance, I didn’t
believe my indicators that said “buy”.
Now I am underwater on a short position.
This time though, I am following my indicators.
Over the last month the S&P 500 has outpaced the INDUSTRIAL
SELECT SECTOR SPDR ETF (XLI) on every time frame from 10-days to 100-days. Now
cracks are beginning to show. The XLI is underperforming on a 10-day and 20-day
basis. That shows investors are
beginning to sell cyclical industrials and that is somewhat bearish. I’d need
to see more divergence before there is a true bearish indication. We also so
some late day selling today and that also shows the Pros are getting concerned.
Add that to the rising VIX even as the S&P 500 is rising and we have more
bearish indications. The “Top Indicator” was even more extreme than yesterday
and it has been giving a sell signal for almost 2-weeks. Bollinger Bands are
again overbought and RSI is a whisker from a sell signal; it was sell 2-days
ago.
About 4% of the total volume on the NYSE was unchanged
today. Some traders see that as a
bearish indication since it shows a level of confusion that sometimes occurs at
tops.
Not all signals are bearish. Closing Tick (the sum of all
last trades on an up or down basis) was positive so some bullishness remains in
late day action. “Money Trend” is up as are the “Sum of 16-Indicators”, but
levels are not extreme and these indicators tend to lag.
Still, it looks like a top, or very near a top, to me and
the late-day selling is another sign of trouble for the bulls.
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 26-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…
TUESDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks
advancing (NYSE): 55.8%. (54.7% 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 85 to 96 (percentage
calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +122 (It was +184 yesterday.)
-10-day moving average of the change in spread: +2. In
other words, over the last 10-days, on average, the spread has increased by 2
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
Tuesday 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.
