PAYROLL REPORT (Reuters)
“U.S. employment fell in September for the first time in
seven years as Hurricanes Harvey and Irma left displaced workers temporarily
unemployed and delayed hiring, the latest indication that the storms undercut
economic activity in the third quarter.
The Labor Department said on Friday nonfarm payrolls
decreased by 33,000 jobs last month…”
Story at…
HOURLY EARNINGS (Yahoo Finance)
“…all eyes were [on] the sharp rise in average hourly
earnings (AHE), which jumped 2.9% year-over-year. This was the strongest growth
since 2009. This indicator of inflation emboldens the Federal Reserve as it
tightens monetary policy.” Story at…
MARKET IS OVERPRICED (CNBC)
"It would be an ill-advised idea to be aggressively
a buyer at these levels," Dennis Gartman told CNBC.” Story at…
He said to be long, but not too long.
MARKET REPORT / ANALYSIS
-Friday the S&P 500 was down about 0.1% to 2549.
-VIX rose about 5% to 9.62. (Any number below 10 is extremely low.)
-The yield on the 10-year Treasury rose to 2.364%. (The
Bond Ghouls don’t seem concerned about a stock drop – they were selling bonds.)
My sum of 17-Indicators remains bullish on a smoothed
long-term. Today it improved from +5 to +7. Taking a look at some individual
indicators we see the following:
Bull Indicators:
-Over the last 10-days 55.5% of stocks have advanced on
the NYSE.
-The advance -decline ratio, another breadth indicator,
has switched from overbought to neutral.
-Cyclical Industrial stocks are out-performing the
S&P 500.
-Money Trend is still positive. (This indicator attempts
to estimate whether money is going into or out of stocks – with varying degrees
of success.)
-Smart Money (based on late-day action) is positive
indicating the Pros remain generally bullish.
-New-high/new-low data still looks good.
-Market Internals were bullish yesterday, but switched
back to Neutral on a 10-day basis today.
-New-highs are still improving on a smoothed basis.
Bear Indicators:
-Over the last month there have been only 4-down
days. That’s extreme and can warn of
declines, but it’s not a foolproof indicator.
-Up volume is headed down.
-Bollinger Bands were overbought yesterday and are nearly
overbought today.
-RSI was overbought yesterday and the day before; today
it is nearly overbought.
-The extreme low VIX is a concern, but this is not a good
indicator for short-term timing.
I think before we see any meaningful pullback, we need to
put in a top. At this point another big
move up, say around 1%, could mark another short-term top. From there a retreat
of some kind, probably in the 3-5% range, is probable.
I remain bullish longer-term. One wonders when this party
will end so I will worry if the numbers deteriorate, but for now I remain fully
invested.
TODAY’S (FRIDAY’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 still falling.
My trade in ITA is up more than 8% in the month I’ve owned it.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
LONG
It is tempting to make a VXX trade if and when we get a big
move up signaling a short-term top. VIX
is at extreme lows. VXX would be a bet against the market and higher VIX. This is a risky trade since as VIX options
expire, they must be replaced with more expensive options (referred to as
contango). For this reason, VXX will
lose value even if VIX stays the same.
My shorting rule is as follows:
-“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
remained 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, the Price
indicator was positive; 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.
