“…As of today [Friday, 24 Feb 2017] (with 92% of the
companies in the S&P 500 reporting actual results for Q4 2016)…For Q4 2016,
the blended earnings growth rate for the S&P 500 is 4.9%. The fourth
quarter will mark the first time the index has seen year-over-year growth in
earnings for two consecutive quarters since Q4 2014 and Q1 2015…The forward
12-month P/E ratio for the S&P 500 is 17.7. This P/E ratio is based on
Thursday’s closing price (2363.81) and forward 12-month EPS estimate ($133.73).”
Earnings Insight available from FACTSET at…
The uptick in earnings, more than Trump, is the most
likely explanation for much of the big run-up in the stock market since last
fall. What should be apparent from the above chart is that Price is closely
related to earnings. It looks like price is way ahead of earnings.
DURABE GOODS ORDERS (Bloomberg)
“Orders for U.S. durable goods rebounded in January, a
sign companies remained upbeat at the start of the year. Bookings for goods
meant to last at least three years rose 1.8 percent after a 0.8 percent
decrease in December…” Story at…
DALLAS FED MANUFACTUIRNG (Business Insider)
“The Dallas Fed manufacturing index unexpectedly jumped
as enthusiasm surrounding US President Donald Trump's election appeared to
carry over into the start of 2017. The latest reading for the index
rose to 24.5 for February…” Story at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was up 0.1% to 2370, another
all-time high.
-VIX rose about 5% to 12.09. (The Options Boys may be
getting nervous.)
-The yield on the 10-year Treasury rose to 2.367%.
Relative Strength, RSI, (SMA-14)
Relative Strength measures the size of up-moves vs.
all-moves on a 14-day moving average basis and presents the result as a
percentile. For example if the RSI is 85, it means that the size of up-moves
are in the 85th percentile when compared to all moves over the 14-day
period. If ALL moves had been up, RSI would be 100 – a definite short term
sell indicator. For my purposes, 30 is oversold (suggesting a turn-around to
the upside) and 80 is overbought. If the up-moves and down-moves are equal in
size over the 14-day period, RSI would be 50. I use the “Cutler RSI” that is
based in a simple moving average since it seems to give a better signal than
those based on an exponential moving average.
Monday RSI (SMA-14) was 95 at the close. It’s been that high only once since February
of 2009. There is no guarantee the market will fall from here, but it is
another indicator that shows that this market is about as overbought as it
gets.
We also note that the S&P 500 has only been down 5-days
in the past month of trading. That is rare, too and one needs to go back 2-1/2
years to find another instance when this occurred. That was shortly before the
index dropped about 5%.
The preponderance of Short-term indicators remains
pointing down too.
Utilities (XLU) were down 0.6% at the close, but moved up
0.6% after-hours. I said Friday that it looked like the Pros are getting
defensive because Utilities were up Thursday and Friday. That’s hard to confirm
based on today’s nowhere action. We’ll see…
My Long-Term Indicator includes some trend-following
indicators so it may not give a timely sell signal. Conservative investors may
want to lighten up on stocks now.
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)
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.
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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
Monday, 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.
