"Sales of newly constructed homes stumbled in April, as
builders retreated after a March surge that marked the strongest selling pace
in a decade….April’s figures were 11.4% lower for the month, but 0.5% higher
than in the same period a year ago.” Story at…
ADS BUSINESS INDEX (Philadelphia FED)
"Note: We [the FED] construct the ADS Index using the latest data
available as of May 18, 2017. The bold vertical lines provide information as to
which indicators are available for which dates. For dates to the left of the
left line, the ADS index is based on observed data for all six underlying
indicators. For dates between the left and right lines, the ADS index is based
on at least two monthly indicators (typically employment and industrial
production) and initial jobless claims. For dates to the right of the right
line, the ADS index is based on initial jobless claims and possibly one monthly
indicator. The limits used on the y axis reflect the minimum and maximum values
of the index over its entire history."
My cmt: The ADS Index jumped up recently. FED data shows the economy is expanding.
RECESSION IN 2019 (Financial Sense)
“March 2019 is the current target date for the next US
recession, says a machine-learning "forecasting engine" developed by
San Diego-based Intensity Corporation. Intensity
boasts a number of very large tech firms as clients—Apple, IBM, Microsoft, and
others—and is itself comprised by a team of data scientists, statisticians, and
econometrically-minded PhDs.” Story at…
THIS TIME REALLLY IS DIFFERENT? (The Felder Report)
“The median stock in the S&P 500 has never been
valued higher than it is today. Corporate profit margins over the past
decade have soared and sustained at heights rarely if ever seen
before. In the past, margin debt was a valuable way to assess risk in the
stock market. This relationship has broken down in recent years. The Buffett
Yardstick was also not just a good way to assess forward 10-year returns for
stocks but also 3-year risk in the stock market, as well. During this cycle
this relationship has also failed. Finally, the relationship between
demographics and equity valuations has also broken down in recent years...
considering where all of the measures mentioned above currently stand investors
better hope that we have, indeed, reached a “permanently high
plateau” for asset prices because a reversion to historical norms from this
point could be just as painful as the last time these four words became so
popular.” Commentary at…
For historical
perspective: “Stock prices have reached what looks like a
permanently high plateau.” – Irving Fisher, Economist, 3 September 1929
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 rose about 0.2% to 2398.
-VIX dropped about 2% to 10.72 at the close.
-The yield on the 10-year Treasury rose to 2.285%.
Volume was off again today, about 15% below the monthly
average. I think it shows some
investor/trader confusion. My sum of
17-indicators was little changed on the day. Longer term it continues to
improve. On a 10-day basis breadth continues to improve. We saw some late-day
selling today, but longer term the trend remains up.
Bollinger bands are creeping together while the Index is
close to its upper band. That usually brings more volatility and a break up or
down. The catch is, RSI is giving a neutral
signal so it’s hard to say whether the break will be up or down. Cyclical
stocks are hinting the move may be down. The Cyclical Industrial ETF, XLI, is
underperforming the S&P 500 over the last month, but not by much so this
isn’t a strong signal.
The S&P 500 made a new high on May 15. Only 5% of stocks made 52-week-highs that
day. That is a weak number at a new-high
and it indicates a narrow market that can be at risk for sudden moves down if
everything doesn’t go right. Back in
March, more than 11% of stocks made 52-week-highs at the S&P 500 new-high,
so there has been some deterioration.
The Index is once again struggling in the 2400 region and
it is once again slightly below 2400 as it was nearly 3-weeks ago. It’s wait-and-see again…
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…
Technology (XLK) is No 1. I would avoid XLE; its 120-day
moving average is falling.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
Long is the favored trade going forward – 5/22/2017.
-“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.
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, Price, Sentiment, Volume & VIX indicators
were neutral. (With VIX recently below
10, VIX may be prone to incorrect signals. Usually, a rising VIX is a bad
market sign; now it may just signal normalization of VIX, i.e., VIX and the
Index may both rise. As an indicator, VIX is out of the picture for a while.)
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, but I consider it fully invested.
