“U.S. consumer confidence declined in December from a
17-year high as Americans became less upbeat about the outlook for the economy
and job prospects, according to figures Wednesday from the New York-based
Conference Board… Even with the latest cooling off, Americans remain upbeat --
this month was the strongest December since 2000.” Story at…
TEXAS MANUFACTURING OUTLOOK (Dallas Fed)
“Texas factory activity expanded strongly in December,
according to business executives responding to the Texas Manufacturing Outlook
Survey. The production index, a key measure of state manufacturing conditions,
spiked 18 points to 32.8, reaching its highest level in more than 11
years…Perceptions of broader business conditions were markedly more positive in
December. The general business activity index and the company outlook index
posted double-digit increases, coming in at 29.7 and 31.5, respectively. Both
represent highs last seen in 2006.” Press release at…
SENTIMENT. I measure Sentiment as %-Bulls
(Bulls/{bulls+bears}) based on the amounts invested in Rydex/Guggenheim mutual
funds. Sentiment is now a sell. On a standard deviation basis, current values
have matched extremes seen during the dot.com crash. This isn’t by itself a
great indicator since sentiment can remain elevated for some time, but it is a
level that has preceded pullbacks of varying degrees – from small pullbacks of
a couple % to major crashes. We’d need
to see more negative signs to take action, but it is a cautionary indication.
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was up about 0.1% to 2683.
-VIX was up about 2% to 10.47.
-The yield on the 10-year Treasury was UP slightly to 2.423%.
My sum of 17 Indicators slipped from +5 to +3. On a
10-day basis, values crept up. A “+” number means that most indicators are
bullish – perhaps too bullish. There are a couple of topping indicators that
are stretched.
No point is getting carried away with details. Volume was about 60% of the norm for the last
month on the NYSE. Overall volumes will remain low over the Holiday period so
it is hard to put too much faith in the indicators.
In the near term I am mildly bullish; longer term I am a
bull, but I recommend caution with the Fed raising rates and shrinking its
balance sheet. This party could end sometime in 2018.
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%. Every Tech stock on the Dow 30 slipped today so
it is no wonder that XLK has slipped to #4.
*For additional background on the ETF ranking system see
NTSM Page at…
Energy (XLE) was #1. The markets are due for some
reversion so perhaps I’ll get a better buying opportunity later. I’ll wait before adding any positions. (I
hold XLK, DVY and SPY. DVY is a dividend play. SPY is a good core holding.)
Under my system in 2017, Technology (XLK) was ranked in
the top 3 Momentum Plays for 52% of all trading days in the year (if I counted
correctly.) XLK is up 35% year to date. Its weighted Average PE is 23.7
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
Caterpillar was #1. (I hold Intel – I’m waiting for a
better entry point before adding other positions.)
Avoid GE and Merck. Their 120-day moving averages are
falling.
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
WEDNESDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained Neutral on the market. (Market Internals are based on a package of
internals and all must be positive to create a positive indication. This
Neutral reading may be the result of low volume overall since low volume makes
up-volume low even if up-volume outpaces down volume. On a percentage basis 56%
of the volume has been up-volume over the last 10-days and that’s reasonably
bullish. )
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
Wednesday, Price indicator was positive; Sentiment was negative;
Volume & VIX indicators were neutral. Price was too positive; it is so high
that it is now a worrisome sign. I would not be surprised to see some selling
in January. With VIX recently
below 10 for a couple of days in May, June, July, August, September, October,
November and now December, 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. VIX below 10 last occurred about
4-months before the year 2007 crash and also several months before the 2001
crash.
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.
