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....
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...
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...
Mid-week market update: The animal spirits are back. Just look at the price action in Tesla. In this environment, it is no surprise that the stock market is embarking on a test of the old highs. Lines in the sand I had set out one line in the sand (see A key...
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...
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....
Mid-week market update: I am old enough to remember that one of the burning question for the January FOMC meeting was be whether the Fed would make a technical adjustment on Interest Paid on Excess Reserves (IOER) by 5 basis points. (They did). Those were simpler times! The stock market rose relentlessly, day after day,...
I just wanted to put out a quick note this morning. The markets are obviously very chaotic this morning and they have taken on a risk-off tone. The VIX Index has spiked above its upper BB, and its term structure has inverted. Both are indications of high fear. Should traders step in and...
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...
Remember the story of the Sorcerer's Apprentice from Fantasia (click link for YouTube video)? Mickey Mouse played the role of a sorcerer's apprentice tasked to carry buckets of water. Instead of doing it himself, he stole the sorcerer's hat and animated a broomstick to carry the buckets for him. To speed up the work, he...
Mid-week market update: Bloomberg reported that BAML strategist Michael Harnett wrote a report back on December 12 forecasting a melt-up. He believed the market's gains would be front loaded in 2020. and he projected an S&P 500 target of 3,333 by March 3. The index reached that level intra-day today, and it's still January. Are...
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...
Callum Thomas recently highlighted an observation from BAML that the market cap of Apple (AAPL) is now larger than the entire energy sector. AAPL is now the largest stock in the index, but its weight at 4.5% is not especially extreme in the context of the historical experience. The fact that AAPL's market cap has eclipsed...
Mid-week market update: The stock market is over-extended. I warned on the weekend about the market's nosebleed valuation (see Priced for perfection). The market's forward P/E ratio of 18.4 matched the levels last seen at the 2017/18 market melt-up. But there are some crucial differences between the last melt-up episode and the one...
I have been in the habit of writing a weekend publication consisting of a relatively long research piece combined with a tactical trading commentary, which has at times been very long. As an experiment, I am splitting the two up. Please let me know if you prefer the format of two shorter posts, or a...
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...
Mid-week market update: The financier Nathan Rothschild was said to have coined the phrase, “Buy on the sound of cannons, sell on the sound of trumpets”. After the New York market closed last night, the news flashed across the wire that Iran had launched missile strikes at Iraqi bases housing American and Coalition military personnel....
Global stock markets opened the week with a risk-off tone. As the day went on, the New York market began in the red, but recovered to be positive for the day. I wrote on the weekend that I still had a bullish tilt, but "the market action in the coming week will be...
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...
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...
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