-“For Q4 2016, the blended earnings growth rate for the
S&P 500 is 5.0%. 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…
…In terms of revenues, 52% of companies have reported
actual sales above estimated sales and 48% have reported actual sales below
estimated sales. The percentage of companies reporting sales above estimates is
equal to the 1- year average (52%) but below the 5-year average (53%).”
Earnings Insight at…
THIS IS A WEAK RALLY (Raymond James)
“Stocks have rallied strongly over the past three months,
but there have been few breadth thrusts. The S&P 500 has enjoyed a 65-day,
10% gain to new highs, but there have been only two days during that stretch
that would qualify as a thrust. That's the weakest such rally since 1999. Our
models continue to suggest that it is unlikely this is going to be the
beginning of a whole new up leg for the S&P 500. In fact, our models
telegraph that the maximum upside from here for the SPX is 2330. That said,
they also suggest no big downside collapse either.” – Jefery Saut.
THE TRIUMPH OF HOPE OVER EXPERIENCE (Felder Report)
“…when risk assets are pricing in economic miracles as
they are today, any outcome that falls short of outright economic utopia is
cause for falling prices. But if there’s one thing I’ve learned over the past couple
of decades it’s that once investors have fallen in love with an asset
bubble wild horses couldn’t drag them away from it, that is until they
inevitably feel the pain of heartbreak once again.” – Jesse Felder. Commentary
at…
NEW FEATURE FOR NTSM BLOG – ETF MOMENTUM
I’ve gotten a number of requests recently, but I’m going
to keep writing this blog anyway…sorry, it’s an old joke.
The requests were to add additional ETFs to the mix of
11-ETFs. So today, we add MATERIALS SELECT SECTOR ETF (XLB); UTILITIES SELECT
SECTOR ETF (XLU); iShares Core MSCI EAFE (IEFA); and SCHWAB EMERGING MRKT ETF
(SCHE).
This rounds out the mix of ETFs by adding Materials,
Utilities, EAFE (Europe and Far East stock Index) and Emerging Markets. In
addition, rather than just reporting the ranked order of the 15-ETFs, I’ll
present a daily bar chart showing the relative strength of each one compared to
the top ranked ETF. Here’s Monday’s chart:
The top ranked ETF (still XLF, Financials) will receive a
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 last 6-months (Oct thru mid-February 2016), Financials (XLF)
have outperformed the S&P 500 by nearly 20%.
My inclination is to invest in the 3 top-ranked ETFs (top
20% of the 15-ETFs). Investing in the top 3 would have captured the entire XLF
run-up; XLF was ranked #2 on 27 October. It wasn’t ranked #1 until 10 November
and by then half of the outperformance was in the books. So if one only invests
in the #1 ranked ETF, a lot may be missed.
Preliminary
Back-testing of a system based on owning the top 3-ETFs throughout the year
follows:
2016: 61% Gain (S&P 500 gain of +11%)
2015: 12% Gain (S&P 500 loss of 1%)
2014: 41% Gain (S&P 500 gain of +11%)
(It’s “preliminary” because I need to check the numbers
after some time passes.)
In practice, these returns may not be possible since it
would involve a lot of trading in and out of the current top 3-ranked ETFs;
further, the assumption is that there is an equal weight to all 3-ETFs. On the other hand, the Technology ETF (XLK)
was the top ranked ETF at the start of 2016; simply buying and holding XLK
would for all of 2016 have produced a 22% gain. Buying Financial ETF (XLK) in
early October when it became a top-3 ranked ETF would have produced 17% gain
thru the end of the year. The Utilities ETF (XLU) produced a 14% gain when it
was ranked in the top-3 at the beginning of the year before dropping out of the
top 3 in mid-March. While I don’t expect
to make these extreme gains in the future, I think beating the S&P 500 is
doable.
*As noted previously, for additional background on the
ETF ranking system see NTSM Page at…
CURRENT RANKING OF 15 ETFs (Ranked Daily)*
#1 RANK for the past 69-days: Financial Select Sector
SPDR ETF (XLF).
Here’s today’s tabular result of the ETF Ranking.
I would avoid IBB, XLU, iEAFE and XLV; currently their
120-dMAs are declining.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was up about 0.5% to 2328.
-VIX rose about 2% to 11.07 and
that’s a lot on a big up-day. (Perhaps the Options Boys are beginning to get
worried.)
-The yield on the 10-year Treasury rose to 2.43%. (Since
the yield is an inverse to price, this means investors were selling
Treasuries.)
Bollinger Bands are indicating overbought; RSI is nearly
overbought; Advance Decline ratio is overbought; Sentiment is at an extreme
high; Volatility is non-existent; Monday was another statistically significant
up-day; Closing Tick remains at overly bullish extremes; Smart Money is selling…Holy
Trump-Rally Batman, will it ever end?
I’m tired of stating the facts on market-based on
indicators that have signaled trouble in the past. The Market is overextended, but NEVER MIND;
stocks appear that they will keep going up forever.
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. Commentary
at…
OK, OK. I’ll be more prudent next time. But wait, the
market is still going up. AAaaaagghhhhh!
Get the straight jacket ready; I’ll need one soon.
MONDAY MARKET INTERNALS (NYSE DATA)
With more ETFs to
track, I am reducing emphasis on reporting detailed daily market internals.
This will free up some time to get the ETF Bar Chart together.
Market Internals remained
Positive 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.
