“New orders for U.S.-made goods fell less than expected
in October and shipments of core capital goods were much stronger than
previously reported, pointing to sustained strength in manufacturing that
should buoy the economy.” Story at…
QQQ TELL (McClellan Financial Publications)
“The high volume seen in QQQ on a recent selloff was a
signal that short term bearish sentiment had gotten overdone. The tech selloff
on Nov. 29, 2017 was a peculiar one, as it was not echoed elsewhere in the
market.” Commentary at…
HINDENBURG OMENS? (Felder Report)
“Recently, there have been a number of these [Hindenburg]
omens triggered on both the NYSE and the NASDAQ. This is really due to the fact
that while the indexes and many of their components have been hitting new
highs, an equally large number of components have been hitting new lows, as
well. This is the sort of persistent dispersion that is the hallmark of a
major market peak.” – Jesse Felder.
My cmt: My version of the Hindenburg requires that the
New-Highs be less than 2xNew-lows; the McClellan Oscillator be negative; and
the 10-dEMA Hi/Lo Logic Index (developed by Norman Fosback in 1979) must be
> 30. In my system I haven’t seen a Hindenburg Omen since Jan 2015. Bottom
line: Breadth and the new-hi/new-low data do not support a bear call now. For
more on the Hindenburg Omen see Mark Hulbert’s column at…
DECEMBER MARKET COMMENT EXCERPT (Hussman Funds)
“At present, the valuation measures that we find best
correlated with actual subsequent S&P 500 total returns are at the most
offensive levels in history, matching or eclipsing the 1929 and 2000
extremes…I’m not saying that Wall Street is misguided to believe that stocks
are appropriately priced here. I’m saying that Wall Street is spectacularly misguided in
that belief.” – John Hussman, PhD.
My cmt:
There may be reasons for this that don’t necessarily
infer overvaluation. For example:
“In less than two decades, more than half of all publicly
traded companies have disappeared. There were 7,355 U.S. stocks in November
1997, according to the Center for
Research in Security Prices at the University of Chicago’s Booth School of
Business. Nowadays, there are fewer than 3,600.” Jason Zweig, WSJ, 23 June
2017.
Combine that
with a 15% rise in population since 2001; or a 170% rise in population since
1929 and we can see why valuations are exceeding prior records. More people are
chasing fewer stocks – it’s (duh) supply and demand. Perhaps the PhDs need to
find a way to adjust for this.
We will have
another crash. I just don’t think that it can be predicted based on valuation.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was down about 0.1% to 2639.
-VIX was up about 2% to 11.68.
-The yield on the 10-year Treasury rose to 2.375%.
My sum of 17 Indicators improved from +6 to +9 on the day
and improved from +17 to +26 on a 10-day basis. That’s is quite bullish. There
are bear signs though.
We’re seeing a little too much bullishness. Bollinger Bands are giving an overbought
indication along with the Overbought/Oversold Index. That Index can be very
early though, so we’ll wait for further indications. RSI was 71 which is fairly high, but not yet
a sell. My bearish point for this
indicator is 80. The Smart Money (based on late day action) is in negative
territory, but is now flat so its neutral.
All in all, I am cautiously bullish in the short-term and
Bullish long term. I think we can get to
mid or later December before we may see some sort of pullback.
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…
Financials (XLF) was #1.
(I hold XLK, DVY and SPY.)
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.
Walmart (WMT) and Intel (INTC) were essentially tied at
#1. (I hold Intel.)
Avoid GE, Merck and Disney. 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…
Intel is down 1.4% since I bought it 31 Oct 2017. This is a risk of a momentum strategy. The
hottest stock can get identified after an earnings surprise and the stock has
already moved. The momentum then slows and
profit taking follows. I am going to
hold Intel because I think buying will pick up again if they are able to keep
up earnings growth. In addition, its PE is a low 15.4 vs the average DOW PE of
25 as of the end of October. The Yield on the S&P 500 (SPY) is 1.9% while
the Dividend for Intel is 2.3%. I think it is worth holding.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the
total portfolio)
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
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals
were Positive on the market. (Market Internals are based on a package of
internals and all must be positive to create a positive indication.
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 indicator was positive; Sentiment, Volume & VIX
indicators were neutral. With VIX recently below 10 for a couple of
days in May, June, July, August, September, October and now November, 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.
