Mid-week market update: The SPX rose to a marginal new high this week but broken down through a narrow range due to the latest he said-he said dispute in Washington. The index appears to have formed an island reversal with bearish implications. The market has fallen through two gaps to test its support level at about the 50 day moving …
How I learned to stop worrying and love the low VIX
Investor angst has been rising over the low level of the VIX Index. A simple glance at Google Trends tells the story of rising anxiety. The VIX Index fell to single digits last week, though it recovered to above 10 by the end of the week. Nevertheless, current levels represent multi-year lows. James Picerno at Capital …
How the bull will die
Preface: 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 the 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 …
Two elections, two questions for investors
In the past week, two key elections have been held that have important geopolitical, economic, and investment implications. First, remember this Time magazine cover? I indicated on February 6, 2017 that the cover may have marked Peak populism. I suggested at the time to buy France and sell Germany as a pairs trade. That trade has certainly worked …
The right and wrong ways to use Rydex sentiment
Rydex funds (now Guggenheim) were early pioneers in offering bull and bear funds, as well as to encouraging switching between bull and bear funds. This innovation attracted short-term traders who had previously been shunned by other mutual fund families. Consequently, Rydex fund assets became an important measure of short-term trader sentiment. Over the years, I have seen numerous analysts using …
Are the Fed and PBoC taking away the punch bowl?
Preface: 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 the 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 …
What’s next for gold?
Mid-week market update: My recent sector review was well received, especially when it was framed in the context of how a market cycle rotation works (see In the 3rd inning of a market cycle advance). As I don’t have much to update about the technical condition of the stock market, especially in light of the non-reaction to the FOMC meeting. …
Finding risk and opportunities from the BAML and Barron’s Big Money polls
You may think that institutional money managers run in herds, but that is not necessarily true. Different managers have different mandates that color their views. As well, their geographical base can also create differences in opinions in how their view their world and markets. Barron’s published its quarterly Big Money poll of institutional money managers on the weekend. The Barron’s ...
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Should you sell in May and go away?
Preface: 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 the 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 …
Just overbought, or a “good overbought” signal?
Mid-week market update: In the past two weeks, I have become progressively more bullish on stocks (see A capitulation bottom? and Buy signals everywhere), based on the belief that the risk/reward trade-off was tilted in favor of the bulls. Even as the market bottomed with sentiment at crowded short levels, the rebound had been unusually weak with little bullish follow-through. …
Will the real Q1 GDP please stand up?
The US Q1 GDP report is scheduled to be released Friday morning. Current expectations call for a Q/Q growth rate of 1.1%, but there are wide disparities in nowcasts. The Atlanta Fed GDPNow nowcast of Q1 GDP growth has been declining since late February and stands at a meager 0.5%. By contrast, the New York Fed’s nowcast has …
In the 3rd inning of a market cycle advance
Preface: 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 the 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 …
Buy signals everywhere
Mid-week market update: One of the most reliable trading signals occur when an indicator becomes oversold and mean reverts to neutral (buy signal), or if it gets overbought and mean reverts to neutral (sell signal). We saw numerous versions of buy signals of that variety from the VIX Index this week. Consider, for example, the VIX/VXV ratio as a measure …
The Art of the Deal, North Korean edition
Can we stop freaking out over the prospect of an imminent war over North Korean nuclear tests? After the hoopla over the North Korean announcement to expect a major event on or before their “Day of the Sun” on April 15, there was much speculation that they would conduct another nuclear test. Trump responded with the assertion that if China …
Buy! The party is still going strongly
Preface: 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 the 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 …
A capitulation bottom?
Mid-week market update: In my weekend post (see Buy the dip!), I wrote that despite my tactical bullishness, “traders need to allow for a brief rally, followed by a sharp drop to a washout low before this shallow correction is over”. We are finally seeing signs of an oversold market and a short-term capitulation. There were a number of signs …
Buy the dip!
Preface: 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 the 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 …
The miracle of Europe
Here in Canada, we are observing the 100 year commemoration of the participation of Canadian troops in the Battle of Vimy Ridge. While the Canadian Corp achieved its objectives of capturing the ridge, it was a typical battle of the First World War that left enormous casualties for both sides. After the horrific human carnage of the First …
Is the gold/platinum ratio flashing a buy signal for stocks?
Mark Hulbert recently highlighted an equity buy signal from an obscure indicator, the gold/platinum ratio. The signal is based on a research paper by Darien Huang, an academic at Cornell. The rationale behind the indicator goes something like this. Both gold and platinum are precious metals, which have defensive characteristics during equity bear markets. But platinum has more …
How a China crash might unfold
As Donald Trump prepares to meet Xi Jingping this week, I am reminded of the long-term challenges that face China, namely its growing debt. There have been many analysts warning of the credit buildup, here is this chart from BCA Research is one of many examples. While I am not calling for an imminent crash in China, here …