“U.S. producer prices fell for the first time in nearly
1-1/2 years in December amid declining costs for services, which could temper
expectations that inflation will accelerate in 2018. Other data on Thursday
showed initial claims for unemployment benefits increasing for the fourth
straight week to more than a three-month high. That probably does not signal
weakness in the labor market as the number of Americans receiving jobless
benefits is at levels last seen in 1973.” Story at…
MARKET REPORT / ANALYSIS
-Tuesday the S&P 500 was up about 0.7% to 2768.
-VIX was up about 0.6% to 9.88.
-The yield on the 10-year Treasury rose to 2.546%.
RSI and the Overbought/Oversold ratio are once again
giving sell signals. Bollinger Bands are
so close to an overbought indication it might as well be a sell. The S&P 500 Index
is 10.8% above its 200-dMA and that’s a sell too. The Index is also 4.7% above
the 50-dMA. You need to go back 2-years to find a higher number. These are topping indicators. All we can say
is that we are close to a short-term top.
Unfortunately, we can only guess at the size of a pullback; 5-10% is
probably a reasonable guess. As a reminder, we have seen these topping
indicators before without a top. The odds of a top soon are higher – but not certain
by any means.
Today was statistically significant. That just means that
the price-volume move up exceeded statistical parameters that I track. The
stats show that about 60% of the time a statistically significant move up will
be followed by a down day the next day.
In spite of topping indicators, my sum of 17 Indicators improved
from +5 to +9 today. On a 10-day basis, values are still slightly falling. A
“+” number means that most indicators are bullish. This doesn’t mean much –
conditions always look good at a top.
I am bearish short-term; longer term I am a bull; but we
are due for a correction in 2018 due to Presidential election cycle history. I still wouldn’t short this market – there are
too many buyers. We’ve gone straight up, and a surprising number of people think
this market is going much higher.
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…
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 2017 (if I counted
correctly.) XLK was up 35% on the year.
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 remained #1.
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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to 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
Thursday, Price and Volume indicators were positive; Sentiment &
VIX indicators were neutral. This adds up o a BUY indication, but at this
point a BUY signal is meaningless. The
NTSM system is designed to issue BUY signals near a Bottom as conditions
improve. Now, it is just an indication
that the market is doing well. The NTSM
long-term signal can sometimes signal BUY at the top if conditions are too good.
If market conditions were to reverse, that’s when we’ll see a Sell signal. The
last actionable Buy signal was on 15 November 2016.
With VIX recently below 10 for
a couple of days each month from May thru December 2017, and now January 2018,
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. 6-months with VIX
below 10 is unprecedented in the last 20-years.
MY INVESTED STOCK POSITION:
TSP (RETIREMENT ACCOUNT – GOV EMPLOYEES) ALLOCATION
I remain FULLY INVESTED.
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.
