“September 20th, 2017 will likely be a day that goes down
in market history.
It will either be remembered as one of the greatest
achievements in the history of monetary policy experiments, or the beginning of
the next bear market or worse.
Given the Fed’s inability to spark either inflation or
economic growth, as witnessed by their dismal forecasting record shown below, I
would lean towards the latter….” – Lance Roberts.
“…An unwind of the
Fed’s balance sheet also increases UST supply to the public. Ultimately, the
Treasury needs to borrow from the public to pay back principal to the Fed
resulting in an increase in marketable issuance. We estimate the Treasury’s
borrowing needs will increase roughly by $1tn over the next five years due to
the Fed roll offs. However, not all increases in UST supply are made
equal. This will be the first time UST supply is projected to increase when EM
reserve growth likely remains benign.
Our analysis
suggests this would necessitate a significant rise in yields or a notable
correction in equity markets to trigger the two largest remaining sources
(pensions or mutual funds) to step up to meet the demand shortfall. Again, this
is a slower moving trigger that tightens financial conditions either by
necessitating higher yields or lower equities.” – Bank of America.
Commentary from RIA available at…
FINAL WARNING (MarketWatch)
“The boy who cried wolf might finally be right. If
liquidity is no longer as ample, it will be much more difficult for already
overvalued markets to get more expensive. That could lead to material market
declines, and the Nasdaq 100, S&P 500, Dow Jones Industrial
Average and Russell 2000 could drop by about 45% without being
undervalued based on historical multiples…investors must remove the handcuffs,
implement risk controls and stop thinking that someone will simply come along
and inject more money into the system to save them if asset declines happen.
Those days seem to be numbered.” - Thomas H. Kee Jr., former Morgan Stanley broker and founder
of Stock Traders
Daily. Commentary
at…
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was up about 0.1% to 2502.
-VIX slipped about 1% to 9.59.
-The yield on the 10-year Treasury dropped to 2.254%.
VIX fell again, down another 1% on the day. Another day below 10 for the VIX. No fear
here, nor is there an expectation of a correction from the Options Boys. See
yesterday’s blog for the discussion of VIX below 10 – it’s a worry, but perhaps
not for a while. Utilities continue to sell off when compared to the S&P
500 – that’s a bullish sign.
Market Internals switched to positive. After today,
advancing volume is headed up over the last 10-days; that’s a reversal from
yesterday. My sum of 17 indicators jumped up, so short-term indicators are
decidedly bullish.
Longer-term, I’m cautiously bullish; I will worry more if
the numbers 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…
Aerospace and Defense (ITA) remained #1 today. I am in
ITA as of 21 Sept.
Avoid XLE; its 120-day moving average is falling.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
LONG
-“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 switched
to Positive 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, Sentiment,
VIX & Volume indicators were neutral. With VIX recently below 10 for a
couple of days in May, June, July, August and September, 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) 24 March
2017 in my long-term accounts, based on short-term indicators. The remainder
is 50% G-Fund (Government securities). This is a conservative retiree
allocation, but I consider it fully invested for my situation.
