JOBLESS CLAIMS (MarketWatch)
“Initial jobless claims were essentially unchanged at
234,000 in early April, holding near extremely low levels that show the U.S.
labor market is going strong despite a slowdown in hiring last month.” Story at…
PRODUCER PRICE INDEX (RTT News)
“A report released by the Labor Department on Thursday
showed a modest decrease in U.S. producer prices in the month of March. The Labor Department said its producer price index for
final demand edged down by 0.1 percent in March….” Story at…
MICHIGAN SENTIMENT (Bloomberg)
“Consumer sentiment advanced to a three-month high in
April as Americans’ optimism about their current financial situation and the
economy reached the strongest point since 2000, University of Michigan survey
data showed Thursday.” Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 dropped about 0.7% to 2329.
-VIX rose about 1% to 15.96 at the close.
-The yield on the 10-year Treasury slipped to 2.236%.
Our watch points have been the 50-dMA and the prior
recent low of 2142. The S&P 500
broke below the 50-dMA Thursday. At that
point, it was sitting on the lower-trend line (by my estimation) and might have
recovered. Unfortunately, the test of
2142 was a failure. Thursday was weak,
but turned downright UGLY in the late
afternoon. (Only 14% of volume on the
NYSE was up.) We had plenty of hints before, but it’s clear now – the Pros do
not like this market. That (among other
indicators) leads to a conclusion that stocks are likely to move lower next
week. Many who didn’t sell may be concerned over the weekend and I think they
will be in the mood to lighten up on stocks Monday or Tuesday. (I may join them depending on Market action
Monday.)
It’s always possible that selling will not pick up and
the buyers might come back. If so, there could be a “turnaround Tuesday”. I’ll be watching the numbers and we’ll try to
find an all-clear point…sooner or later.
The 200-dMA is a likely stopping point for the S&P
500 if the pullback continues. The
200-dMA is 2228 or about 4.5% below Friday’s close. While there have been a lot of down days
recently, the Index is only 2.8% below its high. VIX is slightly below 16 so
complacency remains the word for the day. My “calm-before-the-storm” indicator
again flashed sell. It is based on statistical analysis and identifies calm
markets that often lead to significant down moves. (This indicator caused me a
lot of grief earlier this year when it gave a false signal in early January
that persisted thru all of February.) Even so, it is usually correct.
The average correction (+10%) over the past several years
has lasted about 3-months top to bottom (60-days). Smaller corrections 7-10%
have typically lasted from the 1-2 months. It has been 31-trading days, or
about 6-weeks, since the last Top so this one could be over or not.
There are some Bullish indicators: Bollinger Bands are
now oversold; there have only been 7 up-days in that last month and that’s
oversold; today was another statistically significant (big) down-day and that
is usually followed by an up-day the next day. Further, bottoms occur at big
down-days or a few days after a big down-day.
My guess is that the market will be down next week, but it is
by no means a slam dunk.
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; its 120-dMA is now trending down.
The market has experienced some turmoil now; almost every
ETF was down today. In my back testing it was apparent that during corrections flight
to safety meant that XLU tended to outperform.
Rather than try to play the correction by chasing the hottest ETF, I
suggest exiting all positions, or just remaining with the recent
recommendations (XLK) for long-term investors.
The fact that XLU is outperforming everything is an
indication that the Pros are positioning for a correction.
1. Utilities Select Sector SPDR ETF (XLU) is now the top
ranked ETF.
(I sold XLF today. It has underperformed and as long as
interest rates are falling, it won’t do well. I am still 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 already so these positions
will not be held long if the market moves higher.
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals remained
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
Wednesday, the VIX indicator was negative; Sentiment,
Price & Volume 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 based mostly on low volume at the test of the 50-dMA.
