“U.S. businesses increased their orders in January,
although a key component that tracks business investment spending fell for the
first time in four months. Factory orders rose 1.2 percent, led by a jump in
demand for aircraft, the Commerce
Department reported
Monday.” Story at…
RAYMOND JAMES COMMENTARY (Raymond James)
“…the Daily Sentiment Survey of Futures Traders shows a
92% Bulls reading. In the three times the reading has been that high since 2011
it has led to declines of 7% (2/11), 8% (5/13), and 3% (11/13). Also of note is
that late last week the number of stocks making new 52-week highs on the NYSE
collapsed by some 80%. Then there are the bullish sentiment figures that are at
danger levels...All of this continues to leave us in a cautionary stance
despite the fact that stance has been wrong for three weeks.” – Jeffery Saut.
Commentary at…
THE MOST BROADLY OVERVALUED MOMENT IN MARKET HISTORY
(Hussman Funds)
“There is a quick, knee-jerk response floating around
these days, which asserts that ‘stocks are still cheap relative to interest
rates.’ This argument is quite popular with investors who haven’t spent much
time getting their hands dirty with historical data, satisfied to repeat verbal
arguments they’ve heard elsewhere as a substitute for analysis…What investors may not realize is that the
correlation between interest rates and earnings yields (as well as dividend
yields) has been negative since 1998. Investors across history
have not been consistent at all in treating stocks and bonds as
closely competing substitutes.” – John Hussman, PhD. Weekly Market Commentary at…
POP THEN DROP (CNBC)
“Paulsen [Jim Paulsen, chief investment strategist at
Wells Capital Management] foresees the
S&P 500
as poised to roar to 2,600, then plunge to the 2,200 ballpark as rates rise and
finally recover a bit to close out 2017 at 2,350.” Story at…
My cmt: Perhaps. But it sure looks like there is a
pullback underway. How far will it go?
Sorry, but at this point we have only guesses. My guess is 5-6% off the top,
but anyone can make a good argument for more or less.
BUY AND HOLD? NO. (RIA)
“Most investors don’t start seriously saving for
retirement until they are in their mid-40’s. This is because by the time
they graduate college, land a job, get married, have kids and send them off to
college, a real push toward saving for retirement is tough to do as incomes,
while growing, haven’t reached their peak. This leaves most individuals
with just 20 to 25 productive work years before retirement age to achieve
investment goals. This is where the problem is. There are periods in
history, where returns over a 20-year period have been close to zero or even
negative.” Commentary at…
My cmt: This is an interesting commentary on why
investors saving for retirement must be concerned about corrections.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was down about 0.33% to 2375.
-VIX rose about 3% to 11.24.
-The yield on the 10-year Treasury rose to 2.494%.
When I look at Rydex stock sentiment, I see that
sentiment (measured as %-Bulls) has been rising since the recent all-time high.
That indicates the dip-buyers are moving into Rydex Bull-funds and selling the Bear-funds. Daily action in the S&P 500 may be
confirming that trend, at least for the last 2-days. On both Friday and Monday, we’ve seen a drop
in the morning; buying the rest of the day; and then followed by a weak close
as the smart money appears to be selling.
It looks bearish to me. Further
the chart guys pointed out a bearish “Island Reversal” pattern over the last 5-days
since the gap up last week was not confirmed and was followed by a gap down
today. The gap down wasn’t strong so I
am skeptical, as always, I am not really a chart guy. Here’s more on the
subject of Island Reversals for those interested…
The new-hi/new-lo data deteriorated further today and the
spread has turned negative with more new-lows than new-highs. Breadth (measured as %-of stocks advancing)
slipped below 50% on a 10-day basis, i.e. over the last 10-days there have been
more stocks declining than advancing.
The sum of 16-indicators slipped from zero (neutral) Friday
to -5 Monday. Money Trend is still pointing down. The Pros are still selling
based on Late-day action that has been trending down on average over the last
month, and that trend continued today.
Overall there has been a bearish bent to the data
recently and it turned more bearish today.
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, the number 1 ranked Financials (XLF) outperformed
the S&P 500 by nearly 20%.
*For additional background on the ETF ranking system see
NTSM Page at…
I would avoid iEAFE (Europe and Far East); 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)
XLI was slightly ahead of the XLK, but not enough to
change the recommendation. Further, if
there is a correction, XLI is likely to be among the worst performers.
I have not yet established a position based on the ETF
Ranking; I am waiting for a better entry point.
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 declined
to 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 reduced stock allocation to 25% stocks in the
S&P 500 Index fund (C-Fund) Wednesday, 1 March 2017 in my long-term
accounts.
Remainder is 75% G-Fund (Government securities). This is a conservative retiree
allocation based mostly on short-term signals.
