Sunday , November 17 2019
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Tag Archives: Free Posts

Why small caps are lagging (and what it means)

Mid-week market update: One of the investing puzzles that has appeared in the last few months is the mystery of small cap underperformings. The USD Index has been strong over the last three months, which should create an earnings headwind for large cap multi-nationals with foreign operations. Instead, the relative performance of megacaps have been flat to up over this period, while mid and small cap stocks have lagged.  I unravel performance at a sector level, and discovered some...

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A moment of truth for the stock market

No, the “moment of truth” in the title has nothing to do with the preliminary trade deal announced by Trump last Friday. I have been showing concerns for some time about the market`s valuation. Based on Friday`s close, the market was trading at a forward P/E ratio of 16.9, which is above its 5-year average of 16.6 and 10-year average of 14.9.  If stock prices were to advance from current levels, the E in the P/E ratio has to improve. Earnings Season starts in earnest this week as the...

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A market beating Trend Model, and what it’s saying now

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...

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Time to buy Yom Kippur?

Mid-week market update: There is a trader’s adage, “Sell Rosh Hashanah, Buy Yom Kippur”. As many in the Wall Street community are Jewish, staying out of the stock market during the Jewish high holidays may make some sense. Jewish traders and investors wind down at rosh Hashanah, the Jewish New Year, and return after Yom Kippur, the Day of Atonement, which is today. Indeed, this year’s market weakness began just around Rosh Hashanah. Moreover, the market’s decline was halted yesterday right...

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A 5+ year report card of our asset allocation Trend Model

For years, I have been publishing the readings of my Trend Model on a weekly basis. As a reminder, the Trend Model is a composite model of trend following models as applied to global stock prices around the world, as well as commodity prices.  The model has three signals: Bullish: When there is a clear upwards, or reflationary, global trend Bearish: When there is a clear downwards, or deflationary, global trend Neutral: When the trend signals are not discernible The first derivative...

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The Art of the Deal (with Chinese characteristics)

Our trade war factor has been heating up, though readings remain in neutral. A secondary index (red line) measures Sheldon Adelson’s Macau casinos operator LVS against other gaming stocks (inverted). As Adelson is a major Republican donor, and the casino licenses expire in 2022, the licenses represent another form of backdoor pressure that Beijing can apply to trade relations.  Chinese and American negotiators are scheduled to meet again on Thursday, October 10 for another round of...

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Whatever happened to the Momentum Massacre?

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...

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How deep a pullback?

Mid-week market update: Regular readers will know that I have been relatively cautious on the stock market outlook for several weeks, and my inner trader has been short the market since September 13, 2019 when the SPX was over 3000. The index violated the 50 dma, broke support at 2960 and filled the gap at 2940-2960 yesterday. The decline was sparked by a miss on ISM Manufacturing PMI, which Jeroen Blokland pointed out is closely correlated to stock prices. Lost in the bearish stampede...

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What to watch for in Friday’s Jobs Report

BLS will be publish the September Jobs Report this Friday. This report will be important for a number of reasons, and it will answer some key questions for investors and policy makers. First, the unemployment rate has been troughing. If history is any guide, a rising unemployment rate after a trough has been signals of recessions. This was documented in the Sahm Rule, which was developed as a way to trigger automatic stabilizers and a real-time recession signal.  The Sahm Rule triggers...

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What would an Elizabeth Warren Presidency look like?

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...

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