How to trade a frothy momentum market

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...

The guerrilla war against the PBOC

The enemy advances, we retreat In the wake of the news of the coronavirus infection, the Chinese leadership went into overdrive and made it a Draghi-like "whatever it takes" moment to prevent panic and stabilize markets. When the stock markets opened after the Lunar New Year break, the authorities prohibited short sales, directed large shareholders...

Why the market is rallying on fear – Yes, Fear!

Mid-week market update: What should investors do when faced with competing narratives and historical studies with opposite conclusions? The major market indices made another all-time high today. Ryan Detrick pointed out that ATHs tend to be bullish. That's because of the price momentum effect that is in force which propels stock prices to new highs....

ESG challenges to energy investing

I received a ton of comments from my post three weeks ago on the energy sector (see Energy: Value opportunity, or value trap?). I engaged in multiple long email discussions with several readers on different aspects of that post. This is a follow-up to the publication address two main issues that were raised: The impact...

Where’s the sentiment reset?

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...

Is the melt-up back?

What should investors make of the market's recent air pocket and subsequent recovery? John Autthers, writing at Bloomberg, proposed an analytical framework where investors view the coronavirus outbreak mainly as a China problem. The MSCI World with China exposure (blue line) has been far more volatile than the MSCI World Index (white line). The companies...

A key test: The Zero Hedge bottom?

The website Zero Hedge has built a successful franchise on the internet highlighting bearish and market crash narratives with a series of half-truths, misinformation, and conspiracy theories. A recent screenshot of Zero Hedge headlines gives you an idea of their editorial bias.     In other words, it occupies the supermarket tabloid niche of financial...

Whistling past the graveyard (doji)

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...

Trading the coronavirus panic

Mark Hulbert made a terrific point last week. The coronavirus was not the real reason for the market sell-off. The real reason was excessively bullish sentiment. The coronavirus news was just the excuse. That real culprit is market sentiment: Short-term stock market timers, on balance, have been extraordinarily bullish for a couple of months now....