HUSSMAN COMMENTARY (Hussman Funds)
“Even as an offensively overvalued extreme gives way to
deterioration and dispersion in our measures of market internals, we continue
to observe a nearly religious faith that the economy has entered a new era; a
faith that has no clearer illustration than the exuberance of investors toward
a small group of glamour stocks, currently best known by the acronym FAANG
(Facebook, Apple, Amazon, Netflix, and Google/Alphabet). This all creates a
quite uncomfortable sense of deja vu…Given current valuation extremes, the
associated market losses are likely to be predictably brutal.” – John Hussman,
PhD. Commentary at…
RAYMOND JAMES COMMENTARY (Raymond James)
“The current dip has, so far, taken the S&P 500 down
to our first probable support zone around 2417-2420 where sits the 100-day
moving average and the support trendline connecting the February 2016 and
November 2016 lows (Chart 2). At the same time and as previously mentioned, the
index is oversold more than one standard deviation under its 50-day moving
average for the first time since just before the U.S. presidential election
last year and there likely exists additional support just above 2400, so the
buy-the-dip crowd may make an early-week attempt to boost the market back up.
Nevertheless, practically all of the market breadth indicators we follow are
still pointed down and not yet at “washout” levels that have historically
marked bottoms (Chart 3), indicating selling pressure may not have been
exhausted quite yet.” Jeffrey Saut. Commentary at…
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was up 0.1% to 2428.
-VIX dropped 8% to 13.19.
-The yield on the 10-year Treasury slipped to 2.183%.
We saw some buying at the close so that’s a good sign. Overall
volume on the day was low, almost 15% below the monthly average. No problem
here though; volume is always low after a bottom. Actually, volume doesn’t tell
us much either way.
Again, VIX dropped more than 8% on the day and that’s an
indication that the options boys are less worried and that’s bullish for
stocks.
RSI (14-day, SMA) was 32, very close to an oversold
reading.
My sum of 17-indicators slipped on the day; on a smoothed
basis it has slowed its decline and that may suggest a turn upward soon…but it
hasn’t happened yet.
The indicators have been hinting at a bottom, but New-High/new-low is still showing a lot
of weakness and these numbers need to turnaround if there is going to be a
bottom. Other internals were not very bullish (down volume exceeded up
volume and advancers vs decliners were close to even) Monday. I want to see
some better numbers Tuesday.
Longer-term, I’m cautiously bullish; I will worry more if
the numbers continue to deteriorate, but I remain fully invested. There isn’t
any news now that signals a bear market and long-term indicators remain
neutral.
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…
Once again, Aerospace and Defense (ITA) remained #1.
Avoid XLE, DVY and IWM; their 120-day moving averages are falling.
The weakness
across several sectors is a concern so we need to keep a watchful eye on this
market.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
I take a portion of my cash and apply it strategically to
improve returns in cash. My short-term trading has never been about
get-rich-quick. I haven’t been doing much recently; I don’t have time to watch
and I think short-term trading takes a watchful eye.
-“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
MONDAY 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
Monday, Price,
Sentiment, VIX & Volume indicators were neutral. With VIX recently
below 10 for a couple of days (May, June,
July and now August), VIX may be prone to incorrect signals. Usually, a
rising VIX is a bad market sign; now it may move up, but that might 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.
