“…I like to follow Tom Lee’s thoughts because, like us,
he lets the data do most of his thinking, and, like us, he was one of the few
pundits last year who actually saw potential for the U.S. stock market. He
backed that up, too, with one of the highest S&P 500 targets among
strategists for 2016 (2325), but now, according to Bloomberg, he has the lowest
price target for 2017 among the fifteen strategists they track (2275), further
proof that he doesn’t just parrot consensus numbers.
Reading between the lines of his comments, Lee does not
see substantial upside for the stock market as a whole in 2017, at least not
without a pullback first…” Commentary at…
My cmt: A lot of pundits have turned bearish or at least
cautious recently.
LOW 52-WEEK HIGHS AT ALL-TIME HIGH
I noted Friday that, “…only 3.6% of securities on the NYSE
were advancing today. That is
exceptionally low at an all-time high.” Of the 15 major all-time highs (2007,
2000, etc.) going back to 1929, only three had a lower %- of new-highs at the
top; 3 Sep 1929; 5 Jan 1960; and 14 Jan 2000. Friday also exhibited another
bearish stat: the unchanged volume on the NYSE was 101-million shares. That’s not an extreme; it was that high a
month ago, but high unchanged volume often occurs at a top since it shows
investors are confused.
FLASHBACK TO 14 JAN 2000 (CNN.com)
“U.S. stocks rallied for the second
straight session Friday, pushing the Dow Jones industrial average to a record
high, after government data and words from the nation's most powerful banker
convinced investors that only a small interest rate hike lies ahead…Financial
stocks, ever vulnerable to higher interest rates, catapulted. Gains in American
Express, Citigroup and J.P. Morgan, in addition to those of Intel, lifted the
Dow to its third new high of the week." News from...
Hmmm. Sounds
familiar.
CONFIDENCE (Yale Business)
The chart shows “Confidence that the stock market will go
up in the succeeding year.” This measure of sentiment is way ahead of the
numbers in January 2000 for Institutional Investors (90% now vs 78% in Jan
2000) and about equal to 2000 for Individual Investors (78%). Year 2000 was the last major “valuation-top”
for the Stock Market. This is a bearish sentiment indication. Chart available
at…
My cmt: My own sentiment numbers are matching extremes that
occurred during the dot.com crash too. Sentiment can remain stretched so this
stat, by itself, is not tradable.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was down about 0.4% to 2269.
-VIX rose about 2% to 11.56.
-The yield on the 10-year Treasury was dipped slightly to
2.37%.
Indicators still suggest that the S&P 500 Index is
making a top. My guess is that it will fall
4-5% from its high, but it is always possible that a much larger correction is
in the offing. I am actively short in my
trading portfolio.
Long-term, I’m fully invested at 50% in stocks (a
conservative-retiree allocation).
CURRENT RANKING OF 11 ETFs (Ranked Daily)*
#1 RANK for the past 44-days: Financial Select Sector
SPDR ETF (XLF).
#2 RANK: iShares Russell 2000 – Small Cap (IWM)
#3 RANK: iShares U.S. Aerospace and Defense ETF (ITA)
While the XLF remains ranked #1 using the methodology explained
at the link below, ITA is now outperforming the others over the past 3-weeks on
a percentage gained basis.
*For background on the ETF ranking system see NTSM Page
at…
TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
Rydex 2x Short S&P 500 (RYTPX): Established 6 Dec.
2x Short S&P 500 (SDS): Established 16 Dec.
Long Volatility ETN (VXX): Established 6 Jan 2017.
NET:
MONDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks
advancing (NYSE): 54.0%. (54.7% prior trading-day.) A number above 50% is
usually BULLISH for the markets short-term.
-150-day moving average of advancing stocks: 52.3%. (A
value above 50% indicates a long-term, up-trend.)
-McClellan Oscillator: Fell from +60 to -1 (percentage
calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +60
(It was +98 prior trading day.)
-10-day moving average of the change in spread: -1. In
other words, over the last 10-days, on average, the spread has decreased by 1
each day.
Market Internals
were 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
Monday, the VIX & Volume indicators were neutral. The
Price indicator was positive. The Sentiment indicator was negative.
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.
