“Economic activity increased in each of the twelve
Federal Reserve Districts between mid-February and the end of March, with the
pace of expansion equally split between modest and moderate. In addition, the
pickup was evident to varying degrees across economic sectors. Manufacturing
continued to expand at a modest to moderate pace, although growth in freight
shipments slowed slightly. Consumer spending varied as reports of stronger
light vehicle sales were accompanied by somewhat softer readings in non-auto
retail spending.” Full Beige Book at…
CRUDE INVENTORIES (StreetInsider.com)
“U.S. commercial crude oil inventories (excluding those
in the Strategic Petroleum Reserve) decreased by 1.0 million barrels from the
previous week. At 532.3 million barrels, U.S. crude oil inventories are near
the upper limit of the average range for this time of year.” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dipped about 0.2% to 2338. (The small drop doesn’t indicate what a bad
day it was – up early; then down all day.)
-VIX rose about 4% to 14.93 at the close.
-The yield on the 10-year Treasury rose to 2.216%.
What an ugly day.
The S&P 500 opened higher in the Morning, peaked around 10AM and
then stair stepped down the rest of the day with only a slight recovery in the
last 5-minutes of the day. With the Index below its 50-dMA, today’s price
action was particularly worrisome. It was a classic 1-day example of the Hayes
Indicator – buying in the first half-hour (dumb money) and selling all
afternoon (smart money).
RSI is 38 as of today’s close. That suggests we are closer to a bottom than
top.
The S&P 500 is close to its lower Bollinger Band, but
this is hard to interpret now since Bollinger Bands are very close together. Bollinger
Bands are limit-lines 2-standard deviations above and below the Index. A
Bollinger Band Squeeze occurs when the upper and lower bands get closer than
they have in the last 6-months. They are almost indicating a squeeze now. When that occurs the ensuing breakout can be
strong. In theory, the breakout can be
up or down. With RSI close to a buy signal, perhaps this market move will
surprise everyone and breakout to the upside.
My suspicion is that we will see further down moves, but
perhaps not too much further.
Sentiment climbed to an extreme of 82%-Bulls on a 5-day basis.
I measure Sentiment as %-Bulls (Bulls/{bulls+bears}) based on the amounts
invested in selected Rydex/Guggenheim mutual funds. Sentiment is not a good
indicator by itself though, since it can remain elevated for some time. This is
another sign of dip-buying.
As far as a near-term correction, the jury is still
out. The Index is only down 2.4%
although it has been 6-weeks since the markets made new highs.
Overall I am getting a little more bearish, but there are
bullish signs. It seems odd to me that the Index has broken its lower trend
line and broken the 50-dMA, but the market reaction is almost nonexistent. I guess we need to consider that may be a bullish
sign, but extreme complacency can often be a recipe for trouble.
Bottom line: The Index needs to break above its upper
descending trend-line shown here in Red (or successfully retest recent lows) before
we can get bullish.
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 iEFA and XLE their 120-dMAs are now
trending down. In my back testing it was apparent that during corrections
flight to safety meant that XLU tended to outperform.
1. Utilities Select Sector SPDR ETF (XLU) moved back into
first.
The fact that XLU is outperforming most ETFs is an
indication that the Pros are positioning for a correction. (One might also
argue that it’s in response to falling interest rates that makes utilities more
attractive.) Another sign of market stress is that dispersion between ETFs
drops; and leadership changes frequently. Rather than try to chase the hottest
ETF, I suggest exiting ETF trading positions, or just remaining with the recent
recommendations (XLK) for long-term investors. (I am holding XLK.)
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
Rydex Inverse 2x Nasdaq 100. Established 4/13/2017.
VXX. Established 4/13/2017.
This pullback could
be over quickly (or already) so these positions will not be held long if the
market closes above the upper downtrend line.
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained 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
Wednesday, Sentiment was negative; Price was positive;
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, 24
March 2017 in my long-term accounts, based on short-term indicators.
Remainder is 50% G-Fund (Government securities). This is a conservative retiree
allocation..
