- “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
FOMC (Yahoo Finance)
“For the third time this year the Federal Reserve raised rates, a widely-expected move following
signals from Fed officials. After its two-day policy meeting, the Federal
Open Market Committee voted to lift its benchmark federal funds rate between
1.25% and 1.50% and to continue the process of balance sheet normalization…”
Story at…
CPI (Reuters)
“Underlying U.S. consumer inflation slowed in November,
held down by weak healthcare costs and the biggest drop in apparel prices in
nearly two decades, which could impact the pace at which the Federal Reserve
raises interest rates next year.” Story at…
CRUDE INVENTORIES (OilPrice.com)
“Amid rising oil prices thanks to the three-week
suspension of the Forties pipeline and a major inventory draw estimated by API,
the Energy Information Administration injected some more
optimism in markets with a reported draw of 5.1 million barrels of crude.”
Story at…
MARKET REPORT / ANALYSIS
-Wednesday the S&P 500 was down a point to 2663.
-VIX was UP about 3% to 10.18.
-The yield on the 10-year Treasury dipped to 2.345%.
My sum of 17 Indicators dropped from +2 to -3 on the day
and slipped on a smoothed 10-day basis.
Here are most notable bearish indicators:
-RSI remains bearish at 80.
-Breadth is slipping vs. the S&P 500; it is clear
that the Index has gotten way ahead of the underlying % of stocks
advancing. That is usually bearish, but
not necessarily in a big way. I am still
leery of the advance in the S&P 500.
We are due for a stall or pullback of some kind – we’ll see.
-UP volume is falling on a smoothed 10-day basis.
In the near term I am leaning neutral to bearish; longer
term I am a bull, but I recommend caution with the Fed raising rates and shrinking
its balance sheet. This party could end 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%.
*For additional background on the ETF ranking system see
NTSM Page at…
Financials (XLF) remain #1. The markets look a bit
strained so perhaps I’ll get a better buying opportunity. I’ll wait before adding any positions. (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.
Boeing (BA) was #1. (I hold Intel. I’m waiting for a better
entry point.)
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.
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, Volume & VIX
indicators were neutral. 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.
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.
