“Third-Quarter Real GDP Rises 3.2 Percent; [Corporate] Profits
Hit a Record
” Story at…
PHILADELPHIA FED (Morningstar)
“The Philadelphia Fed's Manufacturing Business Outlook
Survey jumped to a reading of 26.2 in December from 22.7, beating the consensus
forecast of a slight downtick to 21.8.” Story at…
JOBLESS CLAIMS (Reuters)
“The U.S. economy grew at its fastest pace in more than
two years in the third quarter, powered by robust business spending, and is
poised for what could be a modest lift next year from sweeping tax cuts passed
by Congress this week…The fiscal stimulus is expected to come when the economy
is at full employment, which raises the risk of it overheating.” Story at…
LEI (CNBC/Reuters)
“A key economic indicator met expectations in November,
forecasting continued economic growth into 2018. Leading indicators rose by 0.4
percent...” Story at…
SENTIMENT. I measure Sentiment as %-Bulls (Bulls/{bulls+bears})
based on the amounts invested in Rydex/Guggenheim mutual funds. Sentiment is
currently very high. It is not the first time though. On a standard deviation
basis, values matched extremes seen during the dot.com crash back in May-June
2015 shortly before a 12% correction.
It is currently at 86%-bulls (as of Wednesday’s close).
On a standard deviation basis. This again very nearly equal to levels 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
-Thursday the S&P 500 was up about 0.2% to 2685.
-VIX was down about 1% to 9.62.
-The yield on the 10-year Treasury was little changed at
2.485%.
My sum of 17 Indicators improved remained unchanged at +8
on the day. There was, however, continued strong improvement on a 10-day basis.
We are due for a stall or pullback of some kind – we’ll
see. I’m not seeing too many negative indicators, but there are a number of
indicators that are close to turning negative (RSI, Bollinger Bands, Index
above the 200-dMA).
Breadth compared to the S&P 500 has now turned
negative. The % of stocks advancing on
the NYSE does not support the Price change we have seen in the Index. This is a
pretty good indicator, but is not perfect – none are.
Perhaps profit taking in the new-year will start some
real selling. For now, there are few signs of an impending disaster (or even a
slowdown in buying) so I’ll go with the flow.
My version of Smart Money (based on late day action) is
neutral so the Pros aren’t sure either.
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%.
*For additional background on the ETF ranking system see
NTSM Page at…
Technology (XLK) is tied with Financials (XLF) at #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. DVY is a dividend play. SPY is a good core
holding.)
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 and Intel are #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…
THURSDAY MARKET INTERNALS (NYSE DATA)
Market Internals
remained 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 indicator was positive; Sentiment, Volume & VIX
indicators were neutral. Price was too positive; it is so high that it is now a
worrisome sign. 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.
