“Led by declines in production-related indicators, the
Chicago Fed National Activity Index (CFNAI) decreased to –0.05 in January from
+0.18 in December. Three of the four broad categories of indicators that make
up the index decreased from December, and two of the four categories made
negative contributions to the index in January.” Press release at…
For more on the subject, see…
MICHIGAN SENTIMENT (Bloomberg)
“Consumer confidence fell for the first time since
November’s election, as party lines divided Americans following a boost in
enthusiasm for economic policies under President Donald Trump. The University
of Michigan said Friday that its final index of sentiment for February dropped
to 96.3 from January’s 98.5…” Story at…
NEW HOME SALES (Reuter)
“New U.S. single-family home sales rose less than expected
in January, likely hurt by flooding in California, but continued to point to a
strengthening housing market despite higher prices and mortgage rates…Sales
were up 5.5 percent compared to January 2016.” Story at…
ERRANT THINKING (Real Investment Advice)
“While exuberance in the markets currently reigns as
prices continue to reflect economic and fundamental perfection, this time is
likely no different than the last. The only difference will be
that those with experience will leave the markets with the money from those
whom will ultimately gain the experience.”
Commentary and Chart from Real Investment Advice at…
My cmt: Note that prior secular bear-markets have
exhibited 3-major downturns and so far this one has had only 2. While many pundits on CNBC are touting a new
secular bull-market, it is worth pointing out that PE’s, measured about any way
you wish, are at levels seen closer to tops rather than bottoms.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up 0.15% to 2367, another
all-time high.
-VIX dipped about 2% to 11.45.
-The yield on the 10-year Treasury slipped to 2.317%.
What a day! The S&P 500 was weak in the morning and
flattened out mid-day only to rally nearly one-half-% in the last hour and a
half of trading. Closing Tick was a
whopping 870. (I suppose traders didn’t
want to hold shorts over the weekend.) This was the Daytona 500 of closing
rallies given the current context of overbought conditions. Speaking of
overbought, the Relative Strength Index (RSI) was over 90 Thursday for the
fourth day in a row. RSI has not seen 4-days in a row above 90 since March of
2010. The S&P 500 dropped 16% after that signal in a correction that lasted
more than 2-months. That doesn’t mean that we’ll have a repeat now; but it does
indicate that we’re very overbought. RSI closed at 89 today, just missing my
arbitrary value of 90. For what it’s
worth, my work shows that 80 is a level that usually puts pressure on price.
Without getting into too much detail on indicators (I am
tired of repeating the “we’re-near-a-top” mantra) my sum of 16-indicators
dropped from +4 to -5. That’s a fairly
big one-day swing; that’s bearish.
Utilities (XLU) were up 2.5% over yesterday and
today. The Pros are getting defensive. Certainly
looks like a correction is coming. We’ll see…
CURRENT RANKING OF 15 ETFs (Ranked Daily)
The top ranked ETF receives 100%. The rest are then
ranked based on their momentum relative to the leading ETF. While momentum isn’t stock performance per
se, momentum is closely related to stock performance. For example, over the
4-months from Oct thru mid-February 2016, Financials (XLF) have outperformed
the S&P 500 by nearly 20%.
*For additional background on the ETF ranking system see
NTSM Page at…
I would avoid iEAFE; currently its 120-dMA is declining.
Recommended ETF Portfolio of top 3:
1. Financial Select Sector SPDR (XLF)
2. iShares U.S. Aerospace & Defense (ITA)
3. Technology Select Sector SPDR ETF (XLK)
iShares Russell 2000 (IWM); Industrial Select Sector SPDR
ETF (XLI); and XLK are essentially tied for third, but XLK has been stronger
recently.
I have not yet established a position based on the ETF
Ranking; I am waiting for a better entry point. Neither IWM nor XLI will
perform well in a pullback.
SHORT-TERM 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:
Now I wish I had tightened trading rules sooner. I am
underwater again!
-“In a bull market, you can only be long or
neutral.” – D. Gartman
-“The best policy
is to avoid shorting unless a major bear market is underway and downside
momentum has been thoroughly established. Even then, your timing must sometimes
be perfect. In a bull market the trend is truly your friend, and trading
against the grain is usually a fool's errand.” – Clif Droke.
“There are two kinds of forecasters. Those who
don’t know, and those who don’t know they don’t know.”- John Kenneth Galbraith.
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals switched
to 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
Friday, Price was positive; Sentiment Volume & VIX
indicators were neutral.
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.
