“The U.S. cost of living increased in January by the most
since February 2013, led by higher costs for gasoline and other goods and
services that indicate inflation is gathering momentum.” Story at…
RETAIL SALES (Bloomberg)
“U.S. retail sales rose more than forecast last month in
a broad-based advance that indicates the consumer is well-positioned to propel
the economy in early 2017. The 0.4 percent advance in January followed a 1
percent gain in the prior month…” Story at….
EMPIRE MANUFACTURING (MarketWatch)
“The Empire State index of manufacturing conditions in
the New York area jumped to its highest level in more than two years in
February, the New York Fed said Wednesday. The index rose to 18.7 in February
from 6.5 in January.” Story at…
INDUSTRIAL PRODUCTION (RTTNews)
“Reflecting a sharp pullback in utilities output, the
Federal Reserve released a report on Wednesday showing a modest drop in U.S.
industrial production in the month of January. The Fed said industrial
production dipped by 0.3 percent in January…” Story at…
CRUDE INVENTORIES (Reuters/CNBC)
“Oil prices were choppy on Wednesday after a government
report showed a large rise in U.S. crude inventories, signaling ample supply
even as OPEC achieves record compliance with its output-cut accord.” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was up about 0.5% to 2349.
-VIX rose about 12% to 10.97.
-The yield on the 10-year Treasury rose to 2.494%. (Since
the yield is an inverse to price, this means investors were selling Treasuries.
It is hard to know if this is good for stocks or not. Recent reports have noted that both China and
Japan have been selling US Treasuries.)
I listed a litany of bear signs in Monday’s blog and
those negatives remain.
In addition, like Tuesday, today we see that 9 out of the
last 10 days were up. That is a very rare event. There have been only
10-instances in the last 7-years that the S&P 500 has reached that 90%-up
in 10-day extreme. In about half of those instances there were multiple days in
close proximity, like this time. These tend to happen about a month after a
correction bottom, or near a Top. Since the S&P 500 last had a mild
correction in early November, this signal appears to be calling for a top soon.
It’s another indication that the market is overbought – extremely overbought.
(Bollinger Bands & the Advance Decline Ratio remain overbought and RSI is
so close to overbought that it might as well be. They have all been overbought
at the same time only 8 times in the last 7-years.)
Further, Bollinger Bands are issuing an overbought signal
(>2-std deviations above the norm) for the 4th day in a row. That
too is rare. It has not happened since March of 2012 about 2-weeks before a top
that was followed by a 10% drop.
Today we saw the VIX leap up 12% on a day when the
S&P 500 was up 0.5% – the Options Boys are suddenly betting against this
rally. There has also been late day selling that suggests the Pros know
something the rest of us sheep haven’t figured out yet. The odd thing is that
in spite of late day selling, there has been a strong closing tick (the sum of
all last trades +1/-1 depending if the trades were up or down). It looks like
there are a lot of buy-at-the-close orders.
I don’t know why.
As previously noted, the Market is overextended, but
NEVER MIND; stocks appear that they will keep going up forever. EVERYONE IS
BULLISH.
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 IBB, XLV, XLU and iEAFE; currently their
120-dMAs are declining.
Recommended ETF Portfolio of top 3:
Financial Select Sector SPDR (XLF)
iShares U.S. Aerospace & Defense (ITA)
iShares Russell 2000 (IWM)
Also, the Technology Select Sector SPDR ETF is close
enough to the others to be OK.
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.(Hmmmm
– perhaps I am #2, at least in my short-term prognostication.)
FURTHER: Readers
must think I have truly lost my mind to still be short. Yes, probably; but at this point a turn-down in
the short-term seems even more likely and I am holding shorts to minimize
losses. It seems unlikely that I can get
a gain from these positions. I must say
though, short term conditions were actually worse than ever as of Monday and
Tuesday so it seems impossible to get away from these bad trades now. Remember,
this is a trading portfolio and is
only a small portion of the overall portfolio. I remain long with most of my
funds.
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
switched to Positive on the market. (This is a trend following indicator.).
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
Wednesday, Sentiment, Price, VIX & Volume 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.
