Imagining the next bear market

In Subscribers only by Cam Hui

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 ...
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All eyes on policy makers

In Free by Cam Hui

Mid-week market update: As we wait to see if the stock market can break either up or down out of this narrow trading range, this week has been a light week for major market moving economic data, However, there are a number of political and non-economic developments to keep an eye on.     The Fed gets hawkish Early in the …

A market top checklist

In Free by Cam Hui

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 …

3 steps and a stumble: The bull and bear cases

In Free by Cam Hui

Mid-week market update: It was no surprise that the Fed raised rates, as they had spent the last month widely telegraphing their intentions. This morning’s release of February CPI tells the story. Headline CPI is near a 5-year high. Though core CPI (ex-food and energy) edged down, the latest reading of 2.2% is above the Fed’s 2% targeted inflation rate. …

A tale of two markets

In Free by Cam Hui

Mid-week market update: It was the best of times, it was the worst of times. Stock prices continue to surge ahead, while the bond market *ahem* is having its difficulties. The Dow Jones Industrials Average made another record high, followed by the Transportation Average. The combination of the dual all-time highs constitutes a Dow Theory buy signal.     By …

Three key macro factors to watch in today`s market

In Free by Cam Hui

I have spent a lot of time in these pages writing about the influence of macro-economic factors on market analysis. Indeed, Matt King at Citigroup recently highlighted the growing importance of macro factors on the equity market (chart via Bloomberg):   Here are three key macro factors that I have been watching now for clues to the direction of the …

A possible Non-Farm Payroll surprise?

In Free by Cam Hui

Mid-week market update: In the wake of Federal Reserve vice chair Stanley Fischer’s remarks about Friday’s Job Report, the market is mainly playing a waiting game for the results of that announcement. However, there are signs that the Jobs Report may be setting up for a negative surprise which could be bullish for bond and equity prices and bearish for …

FOMC preview: How hawkish the tone?

In Free by Cam Hui

As we approach another FOMC this week, much of the short-term tone of the market will depend on the Fed. In order to analyze what the Fed is likely to do, let`s begin with their mandate, which is price stability (fighting inflation) and full employment. In addition, the Fed has taken on a third objective of financial stability. When I …

Yield curve: Correlation vs. causation edition

In Free by Cam Hui

Further to my last post (see Three steps and a stumble?), I would like to clear up some misconceptions about how I interpret the yield curve and its investment implications. Much of the confusion revolves around the idea of correlation vs. causation. Yield curve inversions don’t cause anything. Yield curve inversions are a signal (correlation) of certain effects that have …

What happens if the Fed gets less dovish?

In Free by Cam Hui

Mid-week market update: There doesn’t seem to be much of a point in writing about the technical condition of the market when its likely path is dominated by a binary event like the FOMC meeting this week. So I thought that I would write about how to interpret and react to the FOMC statement instead. Much of investing is about …

What does the crowded long position in bonds mean for stocks?

In Free by Cam Hui

I encountered a couple of interesting observations about the bond market on the weekend. First, Tom McClellan pointed out that the latest Commitment of Traders report on bond futures shows that the commercial hedgers, who are thought to be the “smart money” are massively short the bond market.   As well, Mark Hulbert observed that bond market timers are showing an …

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. …

2016: Time to get bearish and go “Zero Hedge”?

In Free by Cam Hui

Trend Model signal summary Trend Model signal: Neutral Trading model: Bullish The Trend Model is an asset allocation model which applies trend following principles based on the inputs of global stock and commodity price. In essence, it seeks to answer the question, “Is the trend in the global economy expansion (bullish) or contraction (bearish)?” My inner trader uses the trading model …