“We have just come off of the strongest earnings season
we have seen in years, with the S&P 500 earnings improving nearly 14%. More
importantly, the “bears” that have been telling us earnings may be okay, but
revenue growth is nonexistent, just got proven wrong with revenue up almost 8%.
This is the kind of action you typically see as the equity markets transition
from an interest rate to an earnings driven secular bull market. Obviously,
there will be a time when our indicators, models, and the stock market’s own
price action start to suggest more caution, but now is not that time.” –
Jeffery Saut
HUSSMAN WEEKLY MARKET COMMENTARY EXCERPT (Hussman Funds)
“As of last week, our assessment of the overall market
return/risk profile remains dominated by three factors, the first being
wickedly extreme valuations (which we associate with near-zero expected S&P
500 nominal total returns over the coming 12-year period, with the likelihood of
interim losses on the order of 50-60%), the second being the most extreme
syndromes of overvalued, overbought, overbullish conditions we define, and the
third - and the most important in terms of near-term market risk - being
divergent and deteriorating market internals on the measures we use to assess
investor risk-preferences.” – John Hussman, PhD. Commentary at…
My cmt: This commentary covers aspects of the Fed wind
down of its $4-trillion balance sheet. John Hussman noted, “One of the
risks the Fed is courting here is that if it buys, say, a 7-year Treasury bond,
and its average policy rate over the next 7 years exceeds the
yield-to-maturity when the Fed bought the bond, it will effectively be engaging
in fiscal policy because it will have to pay more
interest to banks than the interest it actually receives on the bond, and it
would not recover that difference at maturity. This would effectively be unconstitutional,
since only Congress can authorize such expenditures through an explicit budget
process.”
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up 0.8% to 2453 for another
new-high.
-VIX was little changed at 10.37.
-The yield on the 10-year Treasury rose to 2.191%.
Pay no attention to the Fed behind the curtain…These are
not the Fed Hikes you are looking for…Move along...Markets shrugged off hawkish
comments by the Fed today, because this time is different. Well…probably not, but to date, the hikes
have been slow, so unless the Fed goes into high gear with hikes in consecutive
meetings the Market may not care.
The size of the move up today was “statistically
significant” (big move up) and that suggests a down day tomorrow. Money Trend
is drifting down, but it remains above zero so it remains positive. My estimate
of money trend is that the trend is slowing its advance. The sum of
17-indicators is down slightly on a smoothed basis. Smart money
(late-day-action) was up today and longer term - this is bullish. Advancing
volume is falling. Bottom line – indicators remain somewhat mixed.
Longer term, I’m cautiously bullish; I will worry more in
late-summer and into early fall.
TODAY’S 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…
XLU (Utilities) remains #1, but it was a loser today down
0.3%. (The biggest loser was Energy (XLE) down 0.6%) Tech (XLK) was up 1.5% on
the day. Given that this is a reversal from what I expected, I will wait a bit
before getting into the #1 ETF. When the
dust settles, XLU may not remain #1.
I would avoid XLE; its 120-day moving average is falling.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
Neutral with no positions recommended. - 5/24/2017
thru present.
I am still not bullish enough to take a long position in
the trading portfolio.
-“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.
-“Commandment #1: “Thou Shall Not Trade Against the Trend.” - James P. Arthur Huprich
FRIDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remain 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
Friday, Price is positive; Volume, Sentiment & 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 for my situation.
