ETF Update: Still Waiting and Employment Preview

Sometimes patience is the best move.

Our TCA-ETF models counsel patience, largely because of the extremely high volatility.  Some may have great confidence about trading over the next few days, but the system says to wait.

I normally do the ETF update on Wednesday, but there is another issue this week.

Pending Issues:  Employment

I normally do an employment preview on Wednesday night before the employment situation report.  This week, most of the sources we review have not yet made a call, presumably because of Monday's holiday.  I'll try to write our highlight tomorrow night (although I have a travel day planned).  This will be too late for trading, so let me provide a brief employment preview.

• Our model sees little in the way of private job gains.  The census numbers will be big, but everyone will subtract those.
• The market rallied today after President Obama's Pittsburgh speech where he expressed confidence about job gains on Friday.  Many noted that VP Biden had similar comments in a speech yesterday.  True or not, many traders believe that the Administration "leaked" a good number.  From this perspective, today's rally anticipated a good Friday number.
• The spin on Friday will subtract census jobs, and find many other reasons to object to the results.  For trading accounts we would play the Friday opening on the short side, expecting to cover with little loss even in the worst case.  The Bearish Blogging Network has our back.  We can count on a full force negative spin on census workers, the unemployment rate, the anemic growth rate, and the various BLS adjustments.

The employment report uncertainty and probable negativity is consistent with our models.

Background

Traders all seek rewards but they
have differing appetites for risk.  It is important to find a method
that suits your personality and needs.  Our short-term trading systems
are
basically Trend-following, but also include recognition of Cycles and a
touch of Anticipation.  Since we apply the method to ETFs, we call it
the TCA-ETF system.  We follow two versions of this method, designed for
two clients (Oscar and Felix) with different needs and risk appetite. 
[New readers can
find more information about the models at the end of this article.]  For
convenience, we have named the models based upon the intended clients.

This
Week's Results

Felix, the cautious approach, has continued on the sideline.  This does not mean a prediction for a lower market. 
If Felix had that forecast the inverse
ETFs would be in the buy range.  Instead, everything is in the penalty
box.  Felix just sees the world as too unpredictable right now.

Oscar,
the more aggressive approach, is always looking for a way to win. 
Oscar is unafraid of the volatility and continues to recommend the short side,
holding all three inverse ETFs.  (We do not endorse or use leveraged
ETFs).

Individual Stock Analysis

With
encouragement from Vince (our modeling expert) I have been looking at
individual stocks to see if Felix approves.  The results this week are
interesting.

The Dow

Felix is still not
ready to embrace  my Dow 20K concept!  Felix has every member of the
Dow in the penalty box, although two stocks have positive ratings.  I
plan to provide regular updates on this analysis if there is reader
interest.  I often use Felix to assist when starting a new position, so
this could be a useful assist to those considering dipping a toe in the
Dow waters.

The NASDAQ 100

Felix does have a few buy candidates in the Nasdaq 100, but most stocks are in the penalty box.  Last week's pick was ORLY, a small winner in a volatile market.  This week's choice is EXPD, a container shipping concern.  Here is the chart:

Felix likes the rebound potential.  We continue to track the single stock plays from the system with great interest.  Meanwhile, we emphasize the main advice from Felix:  Be patient.

Weekly TCA-ETF Rankings

We are currently out of the market in our
Felix ETF
program and short for those following Oscar.  (We are happy to
report and discuss performance with
interested investors.  We also offer a report on how we use the models,
and a free weekly email update.  Write to etf at newarc dot com.  Our
actual trading is a
combination of both models and some weekly timing).

As recently noted, I am changing the timing schedule for this
weekly article.  It
will now appear mid-week, with a one-day delay in the ratings.  The
ratings below are from Tuesday's close.

Please
note that these are not recommendations.  Investor needs and risk
tolerance
varies.  We hope everyone finds the ratings to be a useful supplement to
their own work.  The recommendations can change quite rapidly in this
environment.

Here are the
current
rankings for
both Oscar and Felix.

 

Note for New Readers

Our weekly ETF Update is designed to assist both investors and
traders interested in ETF's and Sector Rotation.  We also have free
reports, available
upon request to etf at newarc dot com.  These reports describe how we
use the system, compare results from Oscar and Felix, and contrast the
method with our long-term trading approach.

Our Method. 
In this past article, we described our basic methodology
and why we believe the rankings are useful for fundamental traders and
technical traders alike.  While we urge readers to check out the entire
article, the key point is that ETF's pose challenges and opportunities
different from investment in individual stocks.  The fundamentals may be
more difficult to assess.  Even with a good grasp on fundamental
trends, there is a lot of technically-based trading in ETF's.  This
means that those trading with a fundamental approach (and we
do this as well) want to monitor the "hot money" moves.  Here is an article on that point.

The system
synopsis. We look at Trending sectors, Cyclical Sectors, and build
in an element of Anticipation for both entry and exit — thus the name
of the model, TCA-ETF.  While we do not reveal the exact methodology for
spotting trends and cycles, the system is not a "black box."  The basic
elements are used by many, and widely reported.  We even discuss the need for human analysis as opposed to black box
trading.

We report the rankings each week, now on the
weekend with a one-day delay, using the Thursday output from the model. 
We monitor and trade this daily, and offer a free report (request via
the email address on the top left of the site) for those interested in
our weekly trading program.

Oscar and Felix. We follow two
versions of this method, designed for
two clients with different needs.

• Oscar believes in the long-term strength of the economy and the
  stock market.  He has a lovable and irrepressible enthusiasm.  When
  things go wrong, he steps back for a bit, but soon tries again.  He
  expects to do better than others during good times.  Oscar understands
  that this approach involves more risk.  Oscar is opportunistic.

• Felix also has a positive long-term outlook, but he is something of a
  fussbudget.  He is much more cautious, with an emphasis on capital
  preservation.  He is perfectly willing to step aside from the market
  when there are signs of danger.  He knows that he will miss some moves,
  but that is OK.  He scores big gains when the market moves lower and he
  escapes the loss.

There is more detail on Oscar and Felix in this article.  There is more about the Penalty Box here.