Where I am finding value in today’s market

In Free by Cam Hui

I was playing around with Relative Rotation Graphs (RRG) on the weekend with a focus on changes in sector leadership (see my previous post RIP Recession. Reflationary resurrection next?). RRG charts measure how a stock or sector is performing relative to a benchmark on a short and long term basis as a way of better understanding the evolution of market leadership. …

RIP Correction. Reflationary resurrection next?

In Free by Cam Hui

Explaining our market timing models We maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on research outlined in our post Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The Trend Model is an asset allocation model …

A “good” overbought market?

In Free by Cam Hui

Mid-week trading update: Last weekend, I pointed to the analysis by Simon Maierhofer, writing in Marketwatch, who highlighted a bullish “kickoff” signal in which the SPX rose for 1.5% or more for three consecutive days (see The market 2-step: 1 forward, 1 back). Such “kickoff” signals have seen higher stock prices 12 months later. So far, the market is roughly acting according to …

Super Tuesday special: How President Trump could spark a market blow-off

In Free by Cam Hui

Let me preface my remarks with two caveats. Firstly, I am politically agnostic and I don`t have a horse in the latest race for the American presidency. As a Canadian, I can`t vote in a US election. As well, it might be considered foolhardy to project what a politician might do based on his campaign promises, particularly during primary season. …

How to trade the Brexit referendum

In Free by Cam Hui

I have tried to refrain from comment on the Brexit referendum vote until the situation had settled down a bit. Now that the campaign is in full swing, it`s time to consider how the markets might react as we approach the June 23 vote. CNBC recently summarized the debate this way: First, the economy, and whether positives like free trade …

The market bottom 2-step: 1 forward, 1 back

In Free by Cam Hui

Explaining our market timing models We maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on research outlined in our post Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The Trend Model is an asset allocation model …

Mind the gaps

In Free by Cam Hui

Mid-week trading update: This morning started off well for the bears – until oil prices began to rally. I wrote on the weekend that while my inner investor was constructive on stocks, my inner trader still believed that downside risk remained. Those views are unchanged. Here is where the SPX stands today. The rally was unable to overcome technical resistance earlier …

Why you can’t believe Shiller on LT equity returns

In Free by Cam Hui

Recently, Business Insider featured a chart of long-term equity returns based on data from Bob Shiller. The lesson was, the longer your time frame and the more patient you are, equities win. That`s been a lesson taught to generations. Based on this data, equities has become the foundation of any portfolio for anyone building a long-term investment plan. While I …

Dear Morgan Stanley, here is the bull case

In Free by Cam Hui

Explaining our market timing models We maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on research outlined in our post Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The Trend Model is an asset allocation model …

Why I tactically shorted stocks today

In Free by Cam Hui

Regular readers recognize that my inner investor is bullish on stocks, though my inner trader remains a little leery and expects further market choppiness (see Profit by thinking like Big Money). Despite my longer term bullishness, I tweeted this morning that I had tactically taken a small, underline the word “small”, short position in SPX in my trading account.   …

Worried about a China devaluation and currency war?

In Free by Cam Hui

I had been meaning to write about this earlier, but I didn`t find the time. Kyle Bass caused a stir last week with his letter to his investors when he wrote that China was on the verge of a major devaluation and financial blow-up (via Valuewalk): Our research suggests that China does not have the financial arsenal to continue on …

Profit by thinking like Big Money

In Free by Cam Hui

Explaining our market timing models We maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on research outlined in our post Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The Trend Model is an asset allocation model …

The price of success

In Free by Cam Hui

Last year, my Valentine’s Day post was about how Facebook analyzed the behavior of who fall in love (see Falling in love, the Facebook version). This year, I thought that I would highlight the price of success for hedge fund managers. I highlight a research paper entitled Limited Attention, Marital Events, and Hedge Funds. Here is the abstract (emphasis added): …

Bracing for more pain

In Free by Cam Hui

In theory, stock prices should be poised to rally. The SPX is testing a key support zone dating back to October 2014 and it is experiencing positive divergences on the 5 and 14 day RSI. If it did bottom here, the initial target would be the first Fibonacci retracement level at about 1935, with further resistance at about 1975 and …

If I had to watch just ONE THING…

In Free by Cam Hui

During periods of market turmoil like the one we are experiencing, it’s important to keep your eye on the ball and not to get overly distracted. If I had to just had to watch just one thing, it would be how forward 12-month EPS are evolving. That’s because Ed Yardeni found that forward EPS is highly correlated with coincidental economic indicators. …

Waiting for the market to heal

In Free by Cam Hui

Model signal summary Ultimate market timing model: Buy equities Trend Model signal: Risk-off Trading model: Bearish (downgrade) The “Ultimate Market Timing Model” is a long-term market timing model based on research outlined in our post Building the ultimate market timing model. The Trend Model is an asset allocation model which applies trend following principles based on the inputs of global …

Is the Fed tightening too much?

In Free by Cam Hui

Regular readers will know that I have been relatively constructive about stock prices longer term, though I am bracing for further short-term volatility. However, the level of anxiety among my readers is high and I have had to play a game of whack-a-mole with bearish themes (as an example see Why China won’t blow up the world (this year)). One …

Why China won’t blow up the world (this year)

In Free by Cam Hui

I had a response to my last blog post in which I indicated that the contagion effects from a China slowdown had been contained (see Bottomed, but wait for a re-test of the lows). A reader pointed to comments by Worth Wray worried aloud about the possible catastrophic of a RMB devaluation. While I had initially dismissed Wray as a permabear, …

Bottomed, but wait for a re-test of the lows

In Free by Cam Hui

Model signal summary Ultimate market timing model: Buy equities Trend Model signal: Risk-off Trading model: Bullish The “Ultimate Market Timing Model” is a long-term market timing model based on research outlined in our post Building the ultimate market timing model. The Trend Model is an asset allocation model which applies trend following principles based on the inputs of global stock …

It’s a savings plan!

In Free by Cam Hui

In the past several weeks, I have been seeing rising levels of angst in social media as the stock market tanked. While anxiety is certainly appropriate for traders, this kind of volatility shouldn’t be a concern for investors as long as they have a plan. Learning to redefine your objectives Here is what I mean by having a plan. In …