Monday , December 6 2021
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The author 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.

Humble student of the markets

A Dow Theory buy signal, but…

Jack Schannep at DowTheory.com described a classic Dow Theory buy signal this way:  The classic Buy signal is developed as follows: After the low point of a primary downtrend in a Bear market is established, a secondary uptrend (this is the most often debated part of the Theory) bounce will occur. After that, a pullback on one of the averages must exceed 3%, according to Robert Rhea in his 1930’s The Dow Theory,  must then, ideally, hold above the prior lows on both the Industrial and...

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A no-surprise Federal Reserve

Mid-week market update: I told you so. Earlier in the week, I wrote that the market had become overly hawkish about interest rate expectations (see Hawkish expectations). Leading up to the November FOMC meeting, the Fed had signaled that a QE taper is about to begin and, if everything goes along with projections, the first rate hike would occur in late 2022.  Fed watcher Tim Duy added (before the meeting) that the Fed had unveiled its spanking new FAIT framework and it was unlikely to...

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Hawkish expectations

Short-term rates are freaking out. 2-year yields are rising based on the expectation of a tightening bias by global central bankers.  The market should gain greater clarity on central bank intentions soon. Both the Fed and the BoE will announce their interest rate decisions this week and the BLS will report Non-Farm Payroll Friday. How hawkish? How hawkish could be Fed turn? Since the market has already discounted an aggressive policy, what does it need to beat expectations?...

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Waiting for the FOMC

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 Asset Allocation Model is an asset allocation model that applies trend following principles based on the inputs of global stock and...

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Making sense of the Great Resignation

An unusual labor market shift has occurred since the onset of the pandemic. Employers everywhere are complaining about a lack of quality employees. The Beveridge Curve, which describes the relationship between the unemployment rate and the job opening rate, has steepened considerably.    Workers are not returning to their jobs, at least not without considerably more incentives. Some factors that affected labor supply are temporary and should moderate over time, such as the fear of...

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A pause in the advance

Mid-week market update: The S&P 500 had been on an upper Bollinger Band ride, but the ride may be over. In the past year, such events have resolved themselves in either a sideways consolidation or pullback. As well, the 14-day RSI has reached levels consistent with a pause in the advance.   Based on recent history, we should know about the magnitude of the pullback within a week. Initial support can be found at the breakout level of about 4540. Intermediate-term bullish...

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What more could the bulls ask for?

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 Asset Allocation Model is an asset allocation model that applies trend following principles based on the inputs of global stock and...

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Where are we in the market cycle?

Where are we in the market cycle? The accompanying chart shows a stylized market cycle and changes in sector leadership. Bear markets are characterized by the leadership of defensive sectors such as healthcare, consumer staples and utilities. Early-cycle markets are sparked by the monetary stimulus or the promise of monetary stimulus. The market leaders in this phase are the interest-sensitive sectors such as financials and real estate. Mid-cycle markets are characterized by economic...

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Another upper BB ride

Mid-week market update: The S&P 500 has been undergoing a ride on its upper Bollinger Band (BB), which historically has been a bullish sign of price momentum. The bigger question is how the tape will behave when the upper BB ride ends.  Here are some observations: The 5-day RSI is extremely overbought, but overbought markets can stay in a “good overbought” condition as prices advance. The 14-day RSI isn’t overbought yet, and past rallies haven’t stalled until it became overbought...

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Opportunities in energy and gold

As the CRB Index decisively broke out to a new recovery high while breaking through both a horizontal resistance level and a falling downtrend that began in 2008, a divergence is appearing between crude oil and gold. The oil to gold ratio has strengthened to test a falling trend line.   This test of trend line resistance could present some opportunities for traders.   Extended energy Has The Economist done it again? Is the latest cover a contrarian signal of a pending top for...

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