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Cam Hui

Cam Hui

Cam Hui has been professionally involved in the financial markets since 1985 in a variety of roles, both as an equity portfolio manager and as a sell-side analyst. He graduated with a degree in Computer Science from the University of British Columbia in 1980 and obtained his CFA Charter in 1989. He is left & right brained modeler of quantitative investment systems. Blogs at Humble Student of the Markets.

Articles by Cam Hui

Nearing peak good news?

February 13, 2019

Mid-week market update: Stock prices have been rallying as it hit a trifecta of good news. First, a compromise seems to have been made on the avoidance of another government shutdown. As well, Trump has been making encouraging noises about a US-China trade agreement. Either both sides could come to an understanding on or before the March 1 deadline, or the deadline will be extended, which is a sign of progress. Should the announcement of a definitive time and date of a Trump-Xi meeting, that would be an encouraging signal that an agreement has been made, and the formal signing ceremony would occur at the summit.
Lastly, Reuters reported that the Cleveland Fed President Loretta Mester stated the Fed is finalizing plans on scaling back or completely eliminating its program to reduce its

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The Art of the Deal meets the Art of the Possible

February 11, 2019

In his 2019 State of the Union address, President Trump said he was seeking “real structural change” to China’s economy:

I have great respect for President Xi, and we are now working on a new trade deal with China. But it must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.
In the next breath, he referred to the reboot of NAFTA, which only yielded minor changes:

Another historic trade blunder was the catastrophe known as NAFTA. I have met the men and women of Michigan, Ohio, Pennsylvania, Indiana, New Hampshire, and many other states whose dreams were shattered by the signing of NAFTA. For years, politicians promised them they would renegotiate for a better deal, but no one ever tried, until now.
Our new

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Here comes the growth scare

February 10, 2019

Preface: Explaining our market timing modelsWe 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 allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, “Is the trend in the global economy expansion (bullish) or contraction (bearish)?”
My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model

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Why there will be a US-China trade deal by March 1

February 7, 2019

Stock prices began on a sour note this morning (Thursday) on the fears of a European growth slowdown. They slid further when Trump advisor Larry Kudlow appeared on Fox Business News and said that there’s “a sizable difference” between the US and China’s positions in the trade negotiations. The White House went on to pour cold water on the idea of an imminent Trump-Xi summit and said that the two may not meet before the March 1 deadline.
The two most trade deal sensitive vehicles, Chinese equity ETFs and soybean prices, weakened as a consequence. However, their technical patterns remain constructive. FXI (top panel) remains in an uptrend as it tested a resistance zone after exhibiting a double bottom. Soybean prices are also in an uptrend and they are also testing resistance.

My

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What gold tells us about stock prices

February 6, 2019

Mid-week market comment: The SPX has risen roughly 400 handles since the December 24 bottom, and it is approaching its 200 dma. Can the market stage a sustainable rally above this key hurdle?

Golden clues
For some clues, we can turn to the price of gold. The top panel of the chart below shows that gold prices tend to have an inverse correlation with stock prices, and that relationship is especially true now. When stocks rise, gold falls, and vice versa.

Here are some clues to the likely direction of stocks from gold prices. First, the long-term outlook for gold prices looks impressive. It is formed a multi–year saucer shaped base. The objective on an upside breakout is about 1560 based on point and figure charting.

In the short run, however, the golden rally looks exhausted

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Demographics isn’t destiny = History rhymes

February 4, 2019

As new data has crosses my desk, I thought I would write a follow-up to my bullish demographic analysis published two weeks ago (see A different kind of America First). To recap, I observed that America is about to enter another echo demographic boom as the Millennial generation enters its prime earnings years. 

A study by San Francisco Fed researchers pointed out that this should raise demand for equities from Millennials. This is especially important as the Baby Boomers reduce their equity holdings as they retire. 

I then postulated that rising savings from Millennial should usher in another golden age in US equities.
This is the part where history doesn’t repeat itself, but rhymes. 

A generation of slackers?
I had some pushback from readers to the effect that the new

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Recession ahead? Fuggedaboutit!

February 3, 2019

Preface: Explaining our market timing modelsWe 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 allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, “Is the trend in the global economy expansion (bullish) or contraction (bearish)?”
My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model

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Dismounting from the market rodeo

January 29, 2019

Mid-week market update: I am publishing the mid-week market update early ahead of the FOMC meeting Wednesday, which can create a high degree of volatility.
It has been over a month since the December 24 market bottom, and stock prices have rallied strongly since that bottom. Indeed, price momentum has continued to lift prices even after the Zweig Breadth Thrust buy signal of January 7 (see A rare “what’s my credit card limit” buy signal). 

Marketwatch reported that Morgan Stanley strategist Mike Wilson thinks it’s time to dismount from this stock market rodeo:

Employing a rodeo metaphor, Wilson on Monday urged his clients to “dismount” as the market’s rally since late 2018 is starting to look precarious.
“Maybe the bull ride since Dec. 24 has not gone a full ‘8 seconds’ but we’d

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A buying opportunity for Chinese stocks?

January 28, 2019

I had a number of bullish comments on China in the wake of my last post (see How worried should you be about China?). Jeroen Blokland pointed out that the market is discounting a lot of weakness in the Chinese economy. 

On the other hand, Caterpillar shares cratered today on jitters of a China slowdown. This brings up the question, “Are Chinese stocks a contrarian buy opportunity?” 

Valuation support
Indeed, there is valuation support for Chinese stocks. Callum Thomas highlighted the low P/E ratios of the China A-Share market. Historically, such valuations have been good low-risk entry points. 

Near-term fundamental momentum
Another reader (thank you, Ken) pointed out that the OECD leading economic indicators are bottoming for China, while they are still falling for the US

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How worried should you be about China?

January 27, 2019

Preface: Explaining our market timing modelsWe 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 allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, “Is the trend in the global economy expansion (bullish) or contraction (bearish)?”
My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model

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How far can this pullback run?

January 23, 2019

Mid-week market update: The Zweig Breadth Thrust buy signal occurred a little two weeks ago. For those who jump onto the bullish bandwagon, it has been an exhilarating ride. This week, the inevitable pullback has arrived. The SPX breached a key uptrend on the hourly chart yesterday (Tuesday), and it could not hold the morning good news rally induced by the positive earnings reports from Comcast, IBM, and United Technologies.

How far can this pullback run?

The bear case
There is a case to be made for a deeper correction, perhaps all the way to test the December lows. OddStats posted some bear porn, based on the historical behavior of the VIX. The forward returns look downright ugly.

Andrew Thrasher also made the case for a re-test of the December lows, based on the extreme

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An opportunity in EM stocks?

January 22, 2019

The latest BAML Fund Manager Survey shows that institutional managers have been piling into emerging market equities while avoiding the other major developed market regions. 

Indeed, there is good reasoning behind the bullish stampede. Callum Thomas showed a series of charts supportive of the EM equity bull case. For one, developed market M-PMIs have been falling while EM PMIs have been mostly steady. 

On a relative basis, EM/DM equity performance are showing signs of a long-term double bottom consistent with the double bottom pattern of the last cycle. 

The cyclical to defensive stock ratio in EM appear to be bottoming. This ratio led the downturn, could it be signaling a risk-on revival? 

Should you follow suit into EM stocks? 

What cyclical rebound?
There is some

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A different kind of America First

January 20, 2019

Preface: Explaining our market timing modelsWe 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 allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, “Is the trend in the global economy expansion (bullish) or contraction (bearish)?”
My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model

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There is no magic black box to profits

January 16, 2019

Mid-week market update: Since my publication detailing the Zweig Breadth Thrust buy signal (see A rare “what’s my credit card limit” buy signal), I have been inundated with questions about the possible twists and turns of the market after such a signal. I discussed this issue extensively in 2015 (see The Zweig Breadth Thrust as a case study in quantitative analysis), my conclusion was:
What can we conclude from examining the data? Perturbing the data can yield different ZBT signals, Even discounting the different versions of the ZBT buy signals, I think that everyone can conclude that we saw a bona fide ZBT buy signal last week.
The question then becomes one of what subsequent returns were and how much can we rely on ZBT to take action in our portfolios. My conclusion, which agrees with

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A State of Emergency for the markets too?

January 14, 2019

President Trump has threatened to impose a State of Emergency in order to get his Wall built. Can he do that? Analysis from The Economist indicates that there is historical precedence for such actions:
Presidents do have wide discretion to declare national emergencies and take unilateral action for which they ordinarily need legislative approval. A “latitude”, John Locke wrote in 1689 (and his writings influenced the US constitution), must be “left to the executive power, to do many things of choice which the laws do not prescribe” since the legislature is often “too slow” in an emergency. American presidents have, for example, suspended the constitutional guarantee of habeas corpus (Abraham Lincoln during the Civil War), forced people of Japanese descent into internment camps (Franklin

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Ursus Interruptus

January 13, 2019

Preface: Explaining our market timing modelsWe 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 allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, “Is the trend in the global economy expansion (bullish) or contraction (bearish)?”
My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model

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The Animal Spirits are stirring

January 9, 2019

Mid-week market update: In light of Monday`s Zweig Breadth Thrust signal, I thought I would do one of my periodic sector reviews to analyze both sector leadership and the implications for stock market direction.
As a reminder, Relative Rotation Graphs, or RRG charts, are a way of depicting the changes in leadership in different groups, such as sectors, countries or regions, or market factors. The charts are organized into four quadrants. The typical group rotation pattern occurs in a clockwise fashion. Leading groups (top right) deteriorate to weakening groups (bottom right), which then rotates to lagging groups (bottom left), which changes to improving groups (top left), and finally completes the cycle by improving to leading groups (top right) again.
A review of the latest RRG chart

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Will the Fed pause in March?

January 8, 2019

In the wake of Powell’s statements last Friday, the market now expects no changes in the Fed Funds rate this year, with a slight chance of a rate hike. 

Contrast those expectations with the dot plot, which has penciled in two rate hikes this year. 

The history of Fed policy is slow incremental changes. Has the market gone overboard on the dovish when it expects a change from two hikes to no hikes? 

What Powell said
The market got all excited on Friday during the ASSA panel discussion featuring Powell, Yellen, and Bernanke. A full transcript of the discussion can be found at the WSJ. In effect, what Powell said changed from “we expect to hike two more times in 2019, with the usual data dependency caveats”, to “anything can happen”. Included in the range of possibilities is a

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A rare “what’s my credit card limit” buy signal

January 7, 2019

The Zweig Breadth Thrust (ZBT) is a variant of the IBD Follow-Through day pattern, but on steroids. Steven Achelis at Metastock explained the indicator this way [emphasis added]:
A “Breadth Thrust” occurs when, during a 10-day period, the Breadth Thrust indicator rises from below 40% to above 61.5%. A “Thrust” indicates that the stock market has rapidly changed from an oversold condition to one of strength, but has not yet become overbought.
According to Dr. Zweig, there have only been fourteen Breadth Thrusts since 1945. The average gain following these fourteen Thrusts was 24.6% in an average time-frame of eleven months. Dr. Zweig also points out that most bull markets begin with a Breadth Thrust.
Monday’s strong NYSE breadth has pushed the ZBT Indicator into buy signal territory.

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H1 2019 roadmap: Expect volatility

January 6, 2019

Preface: Explaining our market timing modelsWe 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 allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, “Is the trend in the global economy expansion (bullish) or contraction (bearish)?”
My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model

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A simple decision vs. a decision process

January 3, 2019

I got some pushback from a reader to my weekend post (see How to spot the bear market bottom) about the FT Alphaville article indicating that former Secretary of Defense Mattis raised concerns about how the White House lacked a decision making process. The reader went on to defend Trump’s decisions.
I try very hard to remain apolitical on this site. Everyone is entitled to their own opinion, but there is a distinction between a decision, and a process. Here is an example from the investment realm. Josh Brown recently ranted about people “who called the correction”. Click this link if the video is not visible.

[embedded content]
Josh Brown’s main complaints can be summarized as:
Anyone can make a market call. If you are wrong, very few people will remember, or you can delete your

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How much do the bulls have left in the tank?

January 2, 2019

Mid-week market update: Happy 2019 to everyone. The post-Christmas period started off with a bang. After bottom out on December 24, the stock market enjoyed four consecutive days of gains – until today when it was spooked overnight by a series of disappointing PMI prints.
The Caixin Manufacturing PMI fell to 49.7 from 50.2 (50.0 expected), indicating contraction. As a reminder, the Caixin PMI differs from China`s official PMI as the Caixin measures mostly the activity of smaller companies, while the official PMI measures the activity of larger SOEs. 

Beijing has responded to past episodes of weakness with a stimulus program, but the stimulus announced so far has been underwhelming, as it has consisted mostly of targeted tax cuts. Anne Stevenson-Yang of J-Capital observed that China

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How to spot the bear market bottom

December 30, 2018

Preface: Explaining our market timing modelsWe 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 allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, “Is the trend in the global economy expansion (bullish) or contraction (bearish)?”
My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model

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A 2018 report card

December 26, 2018

The year is nearly over, and it is time to issue a report card for my investor and trading models. Overall, both had good years, except for the trading blemish at year-end.
My inner investor could not have asked for much more. He was correctly bullish during the run-up from early 2016, and turned cautious at the January top. He turned bullish again as the market corrected in February, and became cautious again in August (see A major top ahead? My inner investor turns cautious).

The cautiousness turned into bearishness in early December when my Ultimate Market Timing Model flashed a sell signal after a 10% drawdown (see A bear market is now underway). As a reminder, the Ultimate Market Timing Model is a very slow turnover model that changes its views only every few years. It was

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What just happened in the stock market?

December 23, 2018

Preface: Explaining our market timing modelsWe 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 allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, “Is the trend in the global economy expansion (bullish) or contraction (bearish)?”
My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model

Read More »

A bloodbath on Wall Street

December 19, 2018

Mid-week market update: I had expected to begin to wind down and relax for the holidays this time of year. Instead, we got a bloodbath in the stock market.
To say that the market is oversold is an understatement. Sure, standard measures indicate oversold conditions, such as the VIX Index had risen above its upper Bollinger Band. Interestingly, the VIX Index failed to rise today despite the carnage in the stock market, which could be a sign of hope for equity bulls.

The Fear and Greed Index is also showing extreme conditions.

Oversold markets can become more oversold. How oversold? This report from UBS puts the velocity of the sell-off into context.

Here is the full chart from UBS:

Rebound ahead?
Here is what happened next. Out of the 14 instances, 8 of the following

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How China and America could both lose Cold War 2.0

December 17, 2018

In a past post (see Pax Americana or America First?), I showed how the combination of the unequal sharing of productivity gains and the inward looking America First policies were eroding US competitiveness, and raising the fragility of the post-WW II Pax Americana boom.
Even though the US and China appears to be locked into a Cold War 2.0, I would like to demonstrate how both countries appear to be locked into paths that will eventually stall their growth.

Andy Haldane’s about face
We begin the story with the Bank of England’s chief economist Andy Haldane, who recently made a remarkable speech to some students at Oxford. Haldane said that he had changed his mind about the drivers of economic growth:
I thought I understood the story of economic growth, its drivers and determinants. But

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How the bear market could end

December 16, 2018

Preface: Explaining our market timing modelsWe 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 allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. 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 component of the Trend Model to look for changes in the

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Good news and bad news from the sentiment front

December 12, 2018

Mid-week market update: This market is becoming increasingly jittery. Indeed, the chart below shows that the stock market moves more per dollar traded than usual, indicating a lack of liquidity. 

This indicates that volatility is likely going to increase. Such an environment can be both profitable and trying for traders, as I have both good news and bad news from the sentiment front. 

Long-term complacency = More downside risk
Let us start with the bad news. My former Merrill Lynch colleague Fred Meissner of The FRED Report is finding signs of long-term complacency in the Investors Intelligence data, and readings are similar to levels observed before the Crash of 1987.

The Investor’s Intelligence poll has three categories: Bulls, Bears, and those expecting a correction. We only

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Pax Americana, or America First?

December 11, 2018

December is the season for investment advisors and portfolio managers to meet with their clients. Here are some thought on your an allocation framework as you prepare for those meetings. As a cautionary message, let’s begin with a “buy and forget” portfolio featured in Fortune in 2000 and how they performed by 2012. 

Haha. Experienced portfolio managers and advisors don’t make those kinds of mistakes. We all know that diversification is the only free lunch in investing.
For the simple answer on personal investing, I refer readers to a Business Insider article by Chelsea Brennan, “I spent 7 years working in finance and managed a $1.3 billion portfolio — here are the 5 best pieces of investing advice I can give you”:
Understand your goals
Index fund investing is the easiest way to

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