“The U.S. economy is back to normal, the labor market is
healthy again and inflation is headed higher, a hawkish Federal Reserve
official said on Tuesday in repeating that he expects the Fed to raise interest
rates three times this year. "Given the state of the economy, more or less
back to normal, I continue to see three modest rate hikes of 25 basis points
each as appropriate for 2017, assuming things stay on track," Philadelphia
Fed President Patrick Harker said in a speech that largely repeated recent
comments on the economy and policy.” Story at…
My cmt: Many Fed-watchers consider 3-hikes in succession
to be a bad sign for the markets.
WHEN SPECULATORS PROSPER THROUGH IGNORANCE (Hussman
Funds)
“There can be little argument that the American economy
as it stands at the beginning of a new century has never exhibited so
remarkable a prosperity for at least the majority of Americans.” - Alan
Greenspan, January 30, 2000...
“…The relationship between the economy and the stock
market is a study in contradiction. It’s precisely when economic optimism is
strongest, when caution is seen as misguided, and when bullish enthusiasm is
most exuberant, that the stock market reaches its speculative apex and becomes
most vulnerable to collapse. It’s precisely when economic pessimism is most dismal,
when hope is set aside, and when bearish consensus is most dire, that market
plumbs its deepest lows and carries the greatest potential for future returns...Presently,
interest-sensitive sectors exhibit the clearest divergences, but we also
observe divergences across numerous measures of breadth, leadership, and
participation that remain more consistent with a speculative blowoff than a
period of robust sponsorship or risk-seeking among investors.” - John Hussman
PhD. Full commentary at...
My cmt: Greenspan timed the top pretty well. The crash that followed resulted in a 78%
loss in the NASDAQ and around 55% for the S&P 500. It’s impossible to say
if the bubble is about to burst this time. It doesn’t seem so, since the Fed
has really not hiked much. I will get
concerned if the VIX blows up; even then, it is most likely that we’ll only see
a correction, but a crash is always possible.
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was up about 0.6% to 2365
(another new high).
-VIX rose about 0.7% to 11.57.
-The yield on the 10-year Treasury rose to 2.432%.
- Today was another strong up-day with a strong move up
in the afternoon – too strong actually. Closing Tick remains at an extreme high
550. A number above 300 is a bearish sign.
-Tuesday was another statistically significant up-day
(based on statistical analysis of market volatility) and that is followed by a
down-day about 62% of the time.
- Bollinger Banns, RSI and the old Advance-Decline Ratio
are all oversold. It doesn’t get much
more bearish than this, at least from an oversold standpoint. They have all
been overbought at the same time only 8 times in the last 7-years.
- Tuesday, we see that once again, 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 had 9-up-days in 10-days. 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
None of my indicators are particularly bullish, but there
are some neutral signs.
-Money Trend indicator is now flat.
-The 10-day sum of 16-indicators is in positive territory,
but the curve is still exhibiting lower highs.
-Late day action has flattened suggesting the Pros are
neutral.
-Market Internals are neutral.
I keep saying this, but the Market is overextended, but
NEVER MIND; stocks appear that they will keep going up forever. EVERYONE IS
BULLISH. CAUTION: When everyone is bullish, there is no one left to buy; there
is no demand; and prices must fall.
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. iShares Russell 2000 (IWM)
Industrial Select Sector SPDR ETF (XLI) has actually
moved slightly ahead of IWM into 3rd.
Let’s see if it holds before changing the recommendation.
Also, the Technology Select Sector SPDR ETF (XLK) is
close to the others.
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.
TUESDAY MARKET INTERNALS (NYSE DATA)
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
Tuesday, Volume was positive; Sentiment, VIX & Price
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.
