“For Q4 2016, the blended earnings growth rate for the
S&P 500 is 4.6%. 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…Looking at future quarters, analysts currently project
earnings growth to continue through 2017. The forward 12-month P/E ratio is now
17.1, which is above the 5-year average and the 10-year average.” – FACTSET
Earnings Insight from…
THE EVERYTHING BUBBLE (MishTalk)
“-The equity risk premium (ERP) is the amount equity
investors can expect to earn over the risk free rate (i.e. 10-year Treasury).
This is thought of as the excess return received for the risk of holding stocks
vs bonds.
-It can be computed by subtracting the yield on the 10-Yr
from the earnings yield (E/P).
-Note the crush in ERP from 4.37% in 2010 (high earnings
yield) to 1.2% today (low earnings yield and rising 10-Yr yields).
-Also note that at a 10-Yr yield above 3.0%, the ERP
goes below 1.0% – said again, the amount investors can expect to earn over the
“risk free” 10-Yr Treasury is below 1% when the 10-year goes above 3%...
[in summary]…we have increasing uncertainty around Policy Trumpacho, the
same operating margin level as 10 and 50 years ago with a 20% premium paid,
PE10 at its third highest level ever, a rising rate environment, ERP indicating
there’s just 1% of excess return over Treasuries, and numerous recent examples
that fundamentals, in the end have a way of rearing up and bucking bad hombres off
when they get too heady.” Commentary at…
My cmt: This is bearish stuff.
JOHN HUSSMAN EXCERPT - COMMENTARY (Hussman Funds)
“Two weeks ago, we observed a fairly rare set of “crash
signatures” that we associate with the risk of market losses in excess of -25%,
generally over a period of about 6 months. No single variable drives these
signatures. Rather, they capture infrequent combinations of market conditions
that may include offensive valuations, dispersion across market internals,
credit market weakness, lopsided bullish sentiment, Federal Reserve tightening,
or other features which, in combination, have historically preceded steep and
compressed plunges in the market. This
elevated risk is now coupled with the poorest long-term return prospects in
history…
… I…strongly encourage…that investors carefully
assess their own investment horizon and risk tolerance, allowing for
what we view as a strong potential for market losses similar to those we
anticipated in 2000-2002 and 2007-2009...” – John Hussman, PhD., Weekley Market
Commentary from Hussman Funds at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was down about 0.2% to 2293.
-VIX rose about 4% to 11.37.
-The yield on the 10-year Treasury slipped to 2.413%.
(Since the yield is an inverse to price, this means investors were buying
Treasuries.)
New England (an AFL) team won Sunday so the Super Bowl
indicator says that the market will fall this year. This indicator has been true 40 of 50 years.
I rank this indicator one step ahead of Astrology, but slightly behind the
Sports Illustrated Swimsuit indicator.
My Friday comments remain true except that Tick has
gotten more bearish and the Advance Decline ratio is no longer overbought.
Broken Record Report: As I’ve said for a while, I think
the upside potential is limited while the downside risk is fairly high, at
least for a short-term pullback. I remain a short-term bear; Long-term I am a Bull.
CURRENT RANKING OF 11 ETFs (Ranked Daily)*
#1 RANK for the past 63-days: Financial Select Sector
SPDR ETF (XLF).
Here’s today’s complete result of the ETF Ranking.
I would avoid IBB and XLV; currently their 120-dMAs are
declining, but they have been improving recently.
*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:
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
(I am beginning to agree with Dennis.)
MONDAY MARKET INTERNALS (NYSE DATA)
-10-day moving average of the percentage of stocks
advancing (NYSE): 54.4%. (55.9% 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: Improved from +57 to +5 (percentage
calculation method adjusted to fit McClellan’s values).
-New-highs minus new-lows: +130
(It was +170 prior trading day.)
-10-day moving average of the change in spread: +6. In
other words, over the last 10-days, on average, the spread has increased by 6 each
day.
Market Internals switched
to 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, Sentiment was negative. VIX & Volume indicators were neutral. The
Price indicator was positive.
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.
