Tag Archives: international

Major Market Buy/Sell Review: 04-27-20

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

NOTE: I have added relative performance information to each graph. Most every graph shows relative performance to the S&P 500 index except for the S&P 500 itself which compares value to growth, and oil to the energy sector. 

S&P 500 Index

  • Last week I wrote: “The break of the 50% retracement this past week, is bullish and suggests a run to the 200-dma is likely. However, the risk/reward is not in the favor of longer-term positions, so trading positions only for now.” 
  • This past week, SPY retested, and held above, the 50% retracement keeping a run to the 61.8% retracement still viable. However, the market does appear to be struggling and is overbought short-term. 
  • This analysis still doesn’t negate the risk of more volatility ahead, so be prepared for sharp declines which means keeping trading stops tight.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No core position
    • This Week: Trading “Rentals” Only 
    • Stop-loss moved up to $265
    • Long-Term Positioning: Bearish

Dow Jones Industrial Average

  • DIA is a little different story as it failed at the 50% retracement and closed below it.
  • Also, on a relative basis, SPY continues to smartly outperform DIA. 
  • If DIA fails to gain traction next week, we will likely see a failure of support. Trading “rentals” only for now with a tight stop at $226
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: Trading “Rentals” Only
    • Stop-loss moved up to $226
  • Long-Term Positioning: Bearish

Nasdaq Composite

  • As we have noted previously, QQQ is by far “the best index” to own currently from a technical basis. 
  • QQQ is outperforming the SPY by a wide margin, but not surprising given the top-5 stocks in the SPY are also the top-5 in the QQQ and are most technology related shares. 
  • Last week’s break above the 200-dma and the 61.8% sets up a test of “all-time” highs. (Pretty incredible when you think about the amount of economic devastation that is coming.)
  • But, from a trading perspective, “What is…is.”
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: Trading “Rentals” Only
    • Stop-loss moved up to $200
  • Long-Term Positioning: Bearish due to valuations

S&P 600 Index (Small-Cap)

  • Small caps continue to sorely underperform large caps in the current environment which also suggests the broader market remains at risk as well. 
  • No change to our positioning on Small-caps which are still “no place to be as both small and mid-cap companies are going to be hardest hit by the virus.”
  • Be careful what you own. 
  • Avoid small-caps. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions.
    • Stop loss adjusted to $44 on trading positions.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • As with Small-caps, we have no holdings. 
  • Relative performance continues to remain exceedingly poor. MDY failed at the 28.2% retracement level and is at risk of a much slower economic environment.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No holding
    • This Week: No holding
    • Stop Loss moved up to $245 for trading positions. 
  • Long-Term Positioning: Bearish

Emerging Markets

  • As with small and mid-cap stocks, emerging and international markets are being hit hard by the virus. Economically, these countries are being destroyed right now. 
  • We previously stated that investors should use counter-trend rallies to sell into. If you haven’t done so, do so Monday. Relative performance remains exceedingly weak. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position
    • This Week: No position.
    • Stop-loss moved up to $33 for trading positions.
  • Long-Term Positioning: Bearish

International Markets

  • Same with EFA as with EEM. 
  • The rally failed at the 28.2% retracement and relative performance remains exceedingly weak. 
  • Remain out of these markets for the time being.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position.
    • This Week: No position.
    • Stop-loss moved up to $51 for trading positions.
  • Long-Term Positioning: Bearish

West Texas Intermediate Crude (Oil)

  • This past week, saw oil prices collapse and then rally back as futures contracts rolled from May to June. That’s the good news, the bad news is that oil prices are going to go lower again as we head into May and storage remains a problem. 
  • We continue to suggest using any rally to clear positions in your portfolio for now.
  • We have not changed out stance on the sector from a “value” perspective, however, and this past week we nibbled into XOM, CVX, and XLE as oil stocks had exceedingly strong relative performance relative to oil. This suggests most of the risk has been pulled out of the sector. We are still carrying very tight stops though. 
  • Short-Term Positioning: Bearish
    • Last Week: No positions
    • This Week: XOM, CVX, and XLE
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • We previously added to our positions in IAU and GDX. 
  • This past week Gold broke out to new highs as inflationary concerns continue to persist. 
  • The sectors are VERY overbought short-term so a pullback is likely that can be used to add to current holdings. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions.
    • This week: Hold positions – Positions can now be added at 157.50
    • Stop-loss moved up to $150
    • Long-Term Positioning: Bullish

Bonds (Inverse Of Interest Rates)

  • Bonds are back to “crazy” overbought with the Fed buying everything from the banks who are happy to mark-up prices and sell it to them. 
  • As we have been adding equity exposure to portfolios, we needed to increase our “hedge” against equity risk accordingly.  We added a 5% position of TLT on Friday for just this reason. 
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Added 5% position of TLT
    • Stop-loss is $152.50
    • Long-Term Positioning: Bullish

U.S. Dollar

Major Market Buy/Sell Review: 04-20-20

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • Last week I wrote: “This past week, the market was able to muster a rally to the 50% retracement level, and on many short-term fronts is extremely overbought. While a retest, and potential break of the March lows is likely, the market does have some lift short-term.”
  • The break of the 50% retracement this past week, is bullish and suggests a run to the 200-dma is likely. However, the risk/reward is not in the favor of longer-term positions, so trading positions only for now. 
  • This still doesn’t negative the risk of more volatility ahead, so be prepared for quick declines, so keep trading stops tight.
  • Remain cautious for now.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No core position
    • This Week: Trading “Rentals” Only 
    • Stop-loss moved up to $278
    • Long-Term Positioning: Bearish

Dow Jones Industrial Average

  • The same situation exists with DIA. 
  • The break of the 50% retracement sets up a run to the 200-dma. 
  • Trading “rentals” only for now with a tight stop at $238
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: Trading “Rentals” Only
    • Stop-loss moved up to $238
  • Long-Term Positioning: Bearish

Nasdaq Composite

  • As we have noted previously, QQQ is by far “the best index in town,” technically speaking.
  • Last week’s break above the 200-dma and the 61.8% sets up a test of “all-time” highs. (Pretty incredible when you think about the amount of economic devastation that is coming.)
  • But, from a trading perspective, “What is…is.”
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: Trading “Rentals” Only
    • Stop-loss moved up to $200
  • Long-Term Positioning: Bearish due to valuations

S&P 600 Index (Small-Cap)

  • No change to our positioning on Small-caps which are still “no place to be as both small and mid-cap companies are going to be hardest hit by the virus.”
  • Be careful what you own. 
  • Avoid small-caps. Use last week’s rally to clear positions for now.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions.
    • Stop loss adjusted to $44 on trading positions.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • As with Small-cap, we have no holdings. Use last week’s rally to sell positions.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No holding
    • This Week: No holding
    • Stop Loss moved up to $245 for trading positions. 
  • Long-Term Positioning: Bearish

Emerging Markets

  • As with small and mid-cap stocks, emerging and international markets are being hit hard by the virus. Economically, these countries are being destroyed right now. 
  • We previously stated that investors should use counter-trend rallies to sell into. If you haven’t done so, use last week’s rally to clear positions.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position
    • This Week: No position.
    • Stop-loss moved up to $33 for trading positions.
  • Long-Term Positioning: Bearish

International Markets

  • As noted previously: “A reflexive rally is likely. Use those levels to sell into.”
  • Use last week’s rally to sell holdings. 
  • Remain out of these markets for the time being.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position.
    • This Week: No position.
    • Stop-loss moved up to $51 for trading positions.
  • Long-Term Positioning: Bearish

West Texas Intermediate Crude (Oil)

  • The “spike” in oil prices on Friday was due to the change in oil futures contracts from May to June. Oil actually declined on Friday with the May contract at $17/bbl. 
  • Regardless, $25 is the price for June delivery of oil. Without any help on the horizon, look for the June contract to head back towards $20/bbl. 
  • We continue to suggests using any rally to clear positions in your portfolio for now.
  • We have not changed out stance on the sector from a “value” perspective, however, the sector still has work to do, so be patient. 
  • Avoid for now.
  • Short-Term Positioning: Bearish
    • Last Week: No positions
    • This Week: No positions.
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • We previously added to our positions in IAU and GDX.
  • The sectors are VERY overbought short-term so a pullback is likely that can be used to add to current holdings. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions.
    • This week: Hold positions – Look at add if support holds at $150
    • Stop-loss moved up to $147.50
    • Long-Term Positioning: Bullish

Bonds (Inverse Of Interest Rates)

  • Bonds are back to “crazy” overbought with the Fed buying everything from the banks who are happy to mark-up prices and sell it to them. 
  • Bond prices will correct and provide a better entry point to add exposure. So, be patient for now. Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Take Profits and rebalance holdings as needed.
    • Stop-loss is $147.50
    • Long-Term Positioning: Bullish

U.S. Dollar

Major Market Buy/Sell Review: 04-13-20

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • Previously we wrote: “Well, that bounce finally came and it was as vicious as we expected. While this remains a “bear market” rally, the media was quick to jump on the “Bear market is over” bandwagon. It isn’t, and investors will likely pay a dear price in April.”
  • This past week, the market was able to muster a rally to the 50% retracement level, and on many short-term fronts is extremely overbought. While a retest, and potential break of the March lows is likely, the market does have some lift short-term.
  • Despite the Fed flooding money into the system, we could be set up for some very volatile moves as the economic data is about to become horrific, and earnings estimates will be revised sharply lower. 
  • Remain cautious for now. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No core position
    • This Week: No core position
    • Stop-loss moved up to $245
    • Long-Term Positioning: Bearish

Dow Jones Industrial Average

  • The same situation exists with DIA.
  • The bounce we discussed previously retraced to the 50% retracement level. We could see some positive action on Monday, but we remain firmly entrenched in a bear market for now. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions.
    • Stop-loss moved up to $210
  • Long-Term Positioning: Bearish

Nasdaq Composite

  • We had previously put on a small QQQ trade for a reflexive rally, but we closed that out. 
  • As with SPY and DIA, the QQQ has established a downtrend, but technically is in MUCH better shape than the other markets with the bull-trend still intact.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions
    • Stop-loss moved up to $180
  • Long-Term Positioning: Bearish due to valuations

S&P 600 Index (Small-Cap)

  • Small-caps are no place to be as both small and mid-cap companies are going to be hardest hit by the virus.
  • Be careful what you own, there are going to be quite a few companies that don’t make it. 
  • Avoid small-caps. Use last week’s rally to clear positions for now.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions.
    • Stop loss adjusted to $44 on trading positions.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • As with Small-cap, we have no holdings. Use last week’s rally to sell positions.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No holding
    • This Week: No holding
    • Stop Loss moved up to $245 for trading positions. 
  • Long-Term Positioning: Bearish

Emerging Markets

  • As with small and mid-cap stocks, emerging and international markets are being hit hard by the virus. Economically, these countries are being destroyed right now. 
  • We previously stated that investors should use counter-trend rallies to sell into. If you haven’t done so, use last week’s rally to clear positions.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position
    • This Week: No position.
    • Stop-loss moved up to $33 for trading positions.
  • Long-Term Positioning: Bearish

International Markets

  • As noted previously: “‘A reflexive rally is likely. Use those levels to sell into.”
  • Use last week’s rally to sell holdings. 
  • Remain out of these markets for the time being.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position.
    • This Week: No position.
    • Stop-loss moved up to $51 for trading positions.
  • Long-Term Positioning: Bearish

West Texas Intermediate Crude (Oil)

  • As stated last week, “Saudi and Russia are NOT likely going to cut production meaningfully as they now have shale drillers in a stranglehold. They are going to talk a lot, but they aren’t going to do anything until they extinguish shale to some degree. For the last couple of years, I have warned this outcome would eventually occur.”
  • Shockingly they did come to an agreement, but it may be too little ,too late and whose to say that member OPEC countries adhere to their commitments.
  • We also stated to use the rally last week to clear positions in your portfolio for now stating:
    • “We will very likely retest or set new lows in the coming months as drillers are forced to “shut in” production. At that point we can start picking through the ruble for portfolio positioning.” 
  • We still like the sector from a “value” perspective and expect that we will wind up making a lot of money here. We clearly aren’t at lows yet, so be patient. 
  • Avoid for now.
  • Short-Term Positioning: Bearish
    • Last Week: No positions
    • This Week: No positions.
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • We added to our positions in IAU and GDX last week as the Fed’s action are starting to raise the specter of rather serious inflation problems. 
  • Last week, Gold broke out to highs and brought the “buy signal” back online. 
  • Gold is a little overbought short-term so use pullbacks to support to add further holdings.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions.
    • This week: Hold positions.
    • Stop-loss moved up to $142.50
    • Long-Term Positioning: Bullish

Bonds (Inverse Of Interest Rates)

  • We have reduced our overall bond exposure, because we are running a very reduced equity exposure currently. This aligns our “hedge” of fixed income relative to our equity book. 
  • However, bonds are now MORE overbought that at just about any other point in history which suggests we could see a tick up in rates and a fall in bond prices. (Such will provide a good opportunity to add bond exposure to portfolios.)
  • Normally, such a reversion would coincide with a “risk on” trade into equities. However, given the economic devastation coming, we need to look back at 2008. In November of 2008, the Fed hit the markets with QE which caused bonds and stocks to rise in unison. However, shortly thereafter, both declined sharply in price as economic realities came to the fore.

  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Take Profits and rebalance holdings as needed.
    • Stop-loss is $147.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • The dollar fell sharply as we had a reflexive “bear market” rally. However, with concerns over the deteriorating global economy and the demand for dollars from abroad, money is flowing back into the dollar for safety. 
  • The recent volatility of the dollar makes it hard to trade for now, so be patient for the moment and let things calm down. We may look to add a long-dollar trade on a pull back to the $98-99 areas. 
  • The dollar is on a strong “buy signal” and is NOT “overbought,” which suggests dollar strength may be with us for a while longer.

Major Market Buy/Sell Review: 04-06-20

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • Last week: “Well, that bounce finally came and it was as vicious as we expected. While this remains a “bear market” rally, the media was quick to jump on the “Bear market is over” bandwagon. It isn’t, and investors will likely pay a dear price in April.”
  • After running into the bullish trend line and the initial 38.2% retracement, the market failed and has established a downtrend. A retest, and potential break of the March lows is likely, but we will monitor this carefully. With the Fed flooding money into the system, we could be set up for some very volatile moves, but the economic data is about to become horrific and earnings estimates will be revised sharply lower. 
  • Remain cautious for now. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position
    • This Week: No position
    • Stop-loss set at $220
    • Long-Term Positioning: Bearish

Dow Jones Industrial Average

  • The same situation exists with DIA.
  • The bounce we discussed previously retraced to the 38.2% retracement level and failed. We could see some positive action on Monday, but we remain firmly entrenched in a bear market for now. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions.
    • Stop-loss set at $185
  • Long-Term Positioning: Bearish

Nasdaq Composite

  • We had previously put on a small QQQ trade for a reflexive rally, but we closed that out. 
  • As with SPY and DIA, the QQQ has established a downtrend, but technically is in MUCH better shape than the other markets with the bull-trend still intact.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions
    • Stop-loss set at $170
  • Long-Term Positioning: Bearish due to valuations

S&P 600 Index (Small-Cap)

  • Small-caps have a lot more downside to go as both small and mid-cap companies are going to be hardest hit by the virus.
  • Be careful what you own, there are going to be quite a few companies that don’t make it. 
  • Avoid small-caps. Use any reflexive rally to step-aside for the time being.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions.
    • Stop loss adjusted to $42 on trading positions.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • As with Small-cap, we have no holdings. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • As with small and mid-cap stocks, emerging and international markets are being hit hard by the virus. Economically, these countries are being destroyed right now. 
  • We previously stated that investors should use counter-trend rallies to sell into. If you haven’t done so, use any rally to clear positions.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position
    • This Week: No position.
    • Stop-loss set at $30 for trading positions.
  • Long-Term Positioning: Bearish

International Markets

  • As noted last week: “‘A reflexive rally is likely. Use those levels to sell into. Do so this week.”
  • Remain out of these markets for the time being.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position.
    • This Week: No position.
    • Stop-loss set at $46 for trading positions.
  • Long-Term Positioning: Bearish

West Texas Intermediate Crude (Oil)

  • Last week, the President said he talked to Saudi Arabia and they were in talks with Russia to cut $10 million barrels of production. That tweet sparked a vicious rally in oil keeping prices above the critical level of $20.
  • Saudi and Russia are NOT likely going to cut production meaningfully as they now have shale drillers in a stranglehold. They are going to talk a lot, but they aren’t going to do anything until they extinguish shale to some degree. For the last couple of years, I have warned this outcome would eventually occur. 
  • Use this rally in oil to clear positions in your portfolio for now. We will very likely retest or set new lows in the coming months as drillers are forced to “shut in” production. At that point we can start picking through the ruble for portfolio positioning. 
  • We still like the sector from a “value” perspective and expect that we will wind up making a lot of money here. We clearly aren’t at lows yet, so be patient. 
  • Avoid for now.
  • Short-Term Positioning: Bearish
    • Last Week: No positions
    • This Week: No positions.
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • We previously added to our position in IAU and continue to have a small holding in GDX, as the previous liquidation left a lot of value in the sector. However, performance remains lazy at this point, so we are looking for pullbacks to support to add to our holdings. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions.
    • This week: Hold positions.
    • Stop-loss set at $137.50.
    • Long-Term Positioning: Bullish

Bonds (Inverse Of Interest Rates)

  • We have reduced our overall bond exposure, because we are running a very reduced equity exposure currently. This aligns our “hedge” of fixed income relative to our equity book. 
  • We remain very cautious on our bond exposure currently, and will look to add to that exposure once the credit markets calm down a bit. 
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $147.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • The dollar fell sharply as we had a reflexive “bear market” rally. However, with concerns over global economic strength rising, money is flowing back into the dollar for safety. 
  • The recent volatility of the dollar makes it hard to trade for now, so be patient for the moment and let things calm down. We can look to add a long-dollar trade on a pull back to the $98-99 areas. 
  • The dollar has reversed its sell signal, which suggests dollar strength may be with us for a while longer.

Major Market Buy/Sell Review: 03-30-20

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index 

  • We previosly wrote: “With the market now 3-standard deviations oversold, a bounce is likely next week as it is expected the Fed will cut rates and restart a substantial QE program. A retracement to the 31.8%, 50%, 62.8% levels are possible and each level should be used to reduce equity risk and hedge.”
  • Well, that bounce finally came and it was a vicious as we expected. While this remains a “bear market” rally, the media was quick to jump on the “Bear market is over” bandwagon. It isn’t, and investors will likely pay a dear price in April.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position
    • This Week: No position
    • Stop-loss set at $220
    • Long-Term Positioning: Bearish

Dow Jones Industrial Average

  • The same situation exists with DIA.
  • The bounce we discussed previously retraced to the 38.2% retracement level and failed. While Monday and Tuesday could see a push higher for quarter end rebalancing, this is still a bear market to be sold into. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions.
    • Stop-loss set at $185
  • Long-Term Positioning: Bearish

Nasdaq Composite

  • Last Monday, in anticipation of a rally, we put on a small QQQ trade. The rally did occur and ran into resistance at the 38.2% retracement level. We closed out the trade Friday afternoon, as we were unwilling to hold over the weekend.
  • We may put on another trade soon, depending on getting the right setup. April promises to be sloppy. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions
    • Stop-loss set at $170
  • Long-Term Positioning: Bearish due to valuations

S&P 600 Index (Small-Cap)

  • As noted last week, small-caps are extremely oversold, and on a very deep “sell signal.”  They did bounce this past week, but underperformed the major indexes substantially. 
  • Avoid small-caps. This particular group of stocks are the most susceptible to an economic slowdown from the virus. Use any reflexive rally to step-aside for the time being.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions.
    • Stop loss adjusted to $42 on trading positions.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • As with Small-cap, we have no holdings. 
  • MDY is oversold, and is on a very deep a “sell signal.” The rally this past week also underperformed the broad market. 
  • As noted last week, “MDY is oversold enough for a counter-trend bounce to sell into. Trading positions only.” That rally is likely done for now.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • As noted last week, EEM was extremely oversold and on a deep sell-signal. A bounce was likely which occurred. 
  • We previously stated that investors should use counter-trend rallies to sell into. Do that now.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position
    • This Week: No position.
    • Stop-loss set at $30 for trading positions.
  • Long-Term Positioning: Bearish

International Markets

  • Like EEM, EFA was also sold previously. as we return our focus back to large cap value.
  • As noted last week: “EFA is very sold and on a deep sell signal. A reflexive rally is likely. Use those levels to sell into.”  Do so this week.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position.
    • This Week: No position.
    • Stop-loss set at $46 for trading positions.
  • Long-Term Positioning: Bearish

West Texas Intermediate Crude (Oil)

  • We still like the sector from a “value” perspective and expect that we will wind up making a lot of money here. We clearly aren’t at lows yet, so be patient. 
  • Oil continues to weaken and supplies are building as economic shutdowns are not good for the crude market. Bankruptcies are rising as well. 
  • Avoid for now.
  • Short-Term Positioning: Bearish
    • Last Week: No positions
    • This Week: No positions.
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • Last week we noted: “It seems that liquidation event may be passing. If Gold can climb back above the 200-dma we will look to add back our holdings.
  • It did.
  • We added to our position in IAU and continue to have a small holding in GDX, as the previous liquidation left a lot of value in the sector. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions.
    • This week: Added to position
    • Stop-loss set at $137.50.
    • Long-Term Positioning: Bullish

Bonds (Inverse Of Interest Rates)

  • We have reduced our overall bond exposure, because we are running a very reduced equity exposure currently. This aligns our “hedge” of fixed income relative to our equity book. 
  • We remain very cautious on our bond exposure currently, and will look to add to that exposure once the credit markets calm down a bit. 
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $147.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • Previously we stated: “This past week, the dollar surged through that resistance and is now extremely overbought short-term. Looking for a reflexive rally in stocks next week that pulls the dollar back towards the breakout level of last week.”
  • That occurred this past week, and the dollar is now approaching its moving average support. 
  • The credit crisis, and rush to cash, sent the dollar surging to 7-deviations above the mean. As we noted previously, with the credit markets calming down we are starting to see previous relationships between asset classes return to normal. 
  • The dollar has reversed its sell signal, which suggests dollar strength may be with us for a while longer.

Major Market Buy/Sell Review: 03-23-20

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • Last week: “With the market now 3-standard deviations oversold, a bounce is likely next week as it is expected the Fed will cut rates and restart a substantial QE program. A retracement to the 31.8%, 50%, 62.8% levels are possible and each level should be used to reduce equity risk and hedge.”
  • Well, no bounce this week, and markets are even more extended and deviated the previously.
  • Again, we suspect a bounce is likely from such extreme moves, but a retest of lows likely before this over. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Hold position
    • This Week: No position
    • Stop-loss set at $250
    • Long-Term Positioning: Bearish

Dow Jones Industrial Average

  • The same situation exists with DIA.
  • DIA is on a very deep “Sell signal” so rallies will most likely fail in the weeks ahead. All stops have been triggered on trading positions.
  • A bounce is still likely, stops reset at recent lows.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Hold current positions
    • This Week: No positions.
    • Stop-loss set at $190
  • Long-Term Positioning: Bearish

Nasdaq Composite

  • QQQ tested and violated its bullish trend line, is now on a deep “sell signal.” This suggests that rallies will likely fail for the time being. 
  • The index is very oversold, so a reflexive rally back to $190-195 is possible. which coincides with the 200-dma, 
  • Trading positions only with stops at recent lows.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Hold position
    • This Week: No positions
    • Stop-loss set at $170
  • Long-Term Positioning: Bearish due to valuations

S&P 600 Index (Small-Cap)

  • As noted in our portfolio commentary, we sold our small-cap positions 5-weeks ago.
  • Small-caps are extremely oversold, and on a very deep “sell signal.”  
  • This particular group of stocks are the most susceptible to an economic slowdown from the virus. Use any reflexive rally to step-aside for the time being.
  • You can deploy a trading position in small-caps for a bounce, but they are underperforming large cap, so I am not sure its worth the risk.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions.
    • Stop loss adjusted to $42 on trading positions.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • As with Small-cap, we have no holdings. 
  • MDY is oversold, and is on a very deep a “sell signal.”
  • MDY has broken all critical supports, and like SLY, there is no reason to “buy” the sector currently. However, MDY is oversold enough for a counter-trend bounce to sell into. Trading positions only. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • Last week: “EEM has completed a “head and shoulders” topping pattern and violated support at the 61.8% retracement level. EEM will eventually test previous lows particularly with a sell signal now registered.” 
  • EEM is very now extremely oversold and on a deep sell-signal.
  • Use counter-trend rallies to sell into. Trading positions only. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position
    • This Week: No position.
    • Stop-loss set at $30 for trading positions.
  • Long-Term Positioning: Bearish

International Markets

  • Like EEM, EFA was also sold previously. as we return our focus back to large cap value.
  • EFA is very sold and on a deep sell signal. A reflexive rally is likely back to $58 to 63 which doesn’t even get you back to the 200-dma. Use those levels to sell into.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position.
    • This Week: No position.
    • Stop-loss set at $46 for trading positions.
  • Long-Term Positioning: Bearish

West Texas Intermediate Crude (Oil)

  • As noted last week: “We just didn’t realize how bad it would get until Saudi Arabia decided to launch a price war, thankfully, we had recommended selling all energy holdings on the Friday before that announcement.”
  • We still like the sector from a “value” perspective and expect that we will wind up making a lot of money here. We clearly aren’t at lows yet, so be patient. 
  • Short-Term Positioning: Bearish
    • Last Week: No positions
    • This Week: No positions.
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • Last week we noted: “Gold had been holding up well as a hedge until this past week where two hedge funds (we suspect Citadel and Millennium) blew up creating margin liquidation across all asset classes included gold, bonds, and even bitcoin.” 
  • It seems that liquidation event may be passing. If Gold can climb back above the 200-dma we will look to add back our holdings.
  • We also added a small position to GDX this past week, as the previous liquidation left a lot of value in the sector. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions.
    • This week: Look to add above $140.
    • Stop-loss set at $137.50.
    • Long-Term Positioning: Bullish

Bonds (Inverse Of Interest Rates)

  • As noted last week: “We previously sold our small position in TLT, and this past week reduced our IEF position by 50% and increased BIL accordingly to shorten duration. The rest of our bond holdings have done the work of supporting the portfolio.” 
  • The margin liquidation event is now bringing bonds back to a “buyable” range and bonds did hold support at the previous market highs. 
  • We remain very cautious on our bond exposure currently, and will look to add to that exposure once the credit markets calm down a bit. 
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Sold bond mutual funds, added position of STIP.
    • Stop-loss is moved up to $147.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • Three weeks ago we stated: “This past week, the dollar surged through that resistance and is now extremely overbought short-term. Looking for a reflexive rally in stocks next week that pulls the dollar back towards the breakout level of last week.
  • The credit crisis, and rush to cash, has sent the dollar surging to 7-deviations above the mean. As the credit markets calm down we should see relationship between asset classes return to normal. 
  • The dollar has reversed its sell signal, which suggests dollar strength may be with us for a while longer.

Major Market Buy/Sell Review: 03-16-20

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

This commentary was written over the weekend prior to the Fed’s Sunday action.

This week I am leaving LAST WEEK’S charts ABOVE this week’s charts so you can realize the magnitude of the moves last week. This is important to keep “perspective” on current allocations and expectations.

S&P 500 Index

  • Last week: “Warning: SPY has triggered a longer-term “sell” signal which historically coincides with deeper declines. We highly suspect that any rally will ultimately fail and we will test the 62.8% retracement level.
  • With the market now 3-standard deviations oversold, a bounce is likely next week as it is expected the Fed will cut rates and restart a substantial QE program. A retracement to the 31.8%, 50%, 62.8% levels are possible and each level should be used to reduce equity risk and hedge. 
  • We are going to have a retest of lows before this over. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Hold position
    • This Week: Hold positions
    • Stop-loss set at $250
    • Long-Term Positioning: Bearish

Dow Jones Industrial Average

  • The same situation exists with DIA.
  • Now back to extreme oversold, trading positions can be added for a counter-trend bounce back to resistance at $240-265.
  • DIA is on a very deep “Sell signal” so rallies will most likely fail in the weeks ahead.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Hold current positions
    • This Week: Trading positions for rally only.
    • Stop-loss set at $210
  • Long-Term Positioning: Bearish

Nasdaq Composite

  • Despite the correction last week, the QQQ is the best looking index from a trading perspective. QQQ tested and held its bullish trend line, but has now registered a “sell signal.” This suggests that rallies will likely fail for the time being. 
  • The the index is very oversold, so look for a reflexive rallies back to $200, which coincides with the 200-dma, or $207 to $215 (which is optimistic.) to reduce exposure and take profits on trading positions. 
  • Trading position in QQQ for a reflexive rally back to the 200-dma which resides at $200
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss set at $175
  • Long-Term Positioning: Bearish due to valuations

S&P 600 Index (Small-Cap)

 

  • As noted in our portfolio commentary, we sold our small-cap positions 4-weeks ago.
  • Small-caps are extremely oversold, and on a very deep “sell signal.”  
  • This particular group of stocks are the most susceptible to an economic slowdown from the virus. Use any reflexive rally to step-aside for the time being.
  • You can deploy a trading position in small-caps for a bounce, but they are underperforming large cap, so I am not sure its worth the risk.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No positions
    • This Week: No positions.
    • Stop loss adjusted to $48 on trading positions.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • As with Small-cap, we have no holdings. 
  • MDY is oversold, and is on a very deep a “sell signal.”
  • MDY has broken all critical supports, and like SLY, there is no reason to “buy” the sector currently. However, MDY is oversold enough for a counter-trend bounce to sell into. Trading positions only. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • Three weeks ago, we stated that “EEM failed at resistance and we sold our exposures to international holdings and return our focus on large cap value for now. EEM has completed a “head and shoulders” topping pattern and violated support at the 61.8% retracement level. EEM will eventually test previous lows particularly with a sell signal now registered.” 
  • EEM is very now extremely oversold and on a deep sell-signal.
  • Use counter-trend rallies to sell into. Trading positions only. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position
    • This Week: No position.
    • Stop-loss set at $32 for trading positions.
  • Long-Term Positioning: Bearish

International Markets

  • Like EEM, EFA was also sold previously. as we return our focus back to large cap value.
  • EFA is very sold and on a deep sell signal. A reflexive rally is likely back to $58 to 63 which doesn’t even get you back to the 200-dma. Use those levels to sell into.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No position.
    • This Week: No position.
    • Stop-loss set at $50 for trading positions.
  • Long-Term Positioning: Bearish

West Texas Intermediate Crude (Oil)

  • Wow. After Russia failed to join OPEC+ in cutting production, and US drillers are producing more than current demand can offset, we said: “Drillers have to drill to make revenue to meet their debt obligations, so ultimately this is going to end very badly.”
  • We just didn’t realize how bad it would get until Saudi Arabia decided to launch a price war, thankfully, we had recommended selling all energy holdings on the Friday before that announcement.
  • We still like the sector from a “value” perspective and expect that we will wind up making a lot of money here. However, we were early, so we are going to step back and look for a better bottom to buy into. We aren’t there yet.
  • Short-Term Positioning: Bearish
    • Last Week: No positions
    • This Week: No positions.
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • Two weeks ago we stated: “Gold rallied sharply and broke out to new highs, suggesting there was something amiss with the stock market exuberance. The correction came this past week, confirming Gold’s message was correct.”
  • Gold had been holding up well as a hedge until this past week where two hedge funds (we suspect Citadel and Millennium) blew up creating margin liquidation across all asset classes included gold, bonds, and even bitcoin. 
  • Fortunately, we previously sold our GDX position (people intensive) and with the liquidation event over we think Gold will return to its ability to hedge. 
  • We will look to add to our position this week if Gold can hold the $200 dma and our stop level at $137.50
  • Short-Term Positioning: Bullish
    • Last week: Hold positions.
    • This week: Look to add at support of $140.
    • Stop-loss set at $137.50.
    • Long-Term Positioning: Bullish

Bonds (Inverse Of Interest Rates)

  • As noted last week: “Carl Swenlin at Decision Point agrees with our view: ‘Price has accelerated into a parabolic advance, so we should be alert for a breakdown very soon. That doesn’t mean that we’ll see a complete collapse, but it is not likely that this vertical ascent will be maintained.’”
  • We previously sold our small position in TLT, and this past week reduced our IEF position by 50% and increased BIL accordingly to shorten duration. The rest of our bond holdings have done the work of supporting the portfolio. 
  • The margin liquidation event is now bringing bonds back to a “buyable” range.
  • As we noted last week: “We agree. Bonds are getting ‘stupid’ overbought which suggests there is plenty of ‘fuel’ for a pretty vicious ‘reflex rally’ in stocks. At 5-standard deviations you are going to see a reversal in rates back to $150-152 on TLT. This is will be your next entry point to buy bonds and sell stocks.”
  • That positioning remains the same this week.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Sold 1/2 of IEF, Added to BIL, looking to add TLT back to portfolios for trading.
    • Stop-loss is moved up to $147.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • It’s been a roller coaster for the US Dollar this past two weeks.
  • Two weeks ago we stated: “This past week, the dollar surged through that resistance and is now extremely overbought short-term. Looking for a reflexive rally in stocks next week that pulls the dollar back towards the breakout level of last week..
  • The dollar rallied last week as the collapse in assets across the board from the margin liquidation event left the “dollar” as the only “safe haven.”
  • The dollar is trying to reverse its sell signal, and with the dollar back to 2-standard deviations, the rally may slow here a bit into next week. 

Major Market Buy/Sell Review: 03-09-20

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • As noted previously, “extensions to this degree rarely last long without a correction.” Now the markets are extremely oversold to the downside so a reflexive rally is likely. However, SPY will trigger a sell signal in the lower panel suggesting that any initial rally will fail and retest of support is likely.”
  • Last week, we did see a reflexive rally but it was short-lived and didn’t reverse the oversold condition. We are still long our “rental trade” in VOOG as the market ended up just slightly above where we ended last week. 
  • On Friday, there was a good bit of last hour buying which suggests institutions have likely gotten exhausted on selling. As such, there should be another reflexive rally again this next week in which we will remove the rental trade.
  • Warning: SPY has triggered a longer-term “sell” signal which historically coincides with deeper declines. We highly suspect that any rally will ultimately fail and we will test the 62.8% retracement level.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Hold position
    • This Week: Hold positions
    • Stop-loss adjusted to $290
    • Long-Term Positioning: Bearish

Dow Jones Industrial Average

  • The same situation exists with DIA.
  • Now back to extreme oversold, trading positions can be added for a counter-trend bounce back to resistance at $265-270.
  • DIA has triggered a “Sell signal” so rallies will most likely fail in the weeks ahead.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Hold current positions
    • This Week: Hold current positions
    • Stop-loss moved up to $250
  • Long-Term Positioning: Bearish

Nasdaq Composite

  • Despite the correction last week, the QQQ is the best looking index from a trading perspective.
  • The correction this past week took the index back to oversold, and the buy signal has now reversed but has NOT yet triggered a “Sell” signal like SPY and DIA. 
  • Trading position in QQQ for a reflexive rally back to the 50-dma which resides at $221
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $207
  • Long-Term Positioning: Bearish due to valuations

S&P 600 Index (Small-Cap)

 
  • As noted in our portfolio commentary, we sold our small-cap positions the week before last. 
  • Small-caps are oversold, and on a “sell signal.”  
  • This particular group of stocks are the most susceptible to an economic slowdown from the virus. Use any reflexive rally to step-aside for the time being.
  • In our portfolio we own KGGIX which is “technically” a “small-cap value fund.” However, we don’t classify it that way as it holds a significant chunk of Gold Miners which fits with our hedge theme.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Sold all positions.
    • This Week: No positions.
    • Stop loss adjusted to $62
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • Previous, we said: “MDY remains extremely extended above the 200-dma, so more corrective action is likely. MDY is still on a buy-signal but is pushing rather extreme deviations from long-term means.”
  • Over the last two weeks, that changed. Now MDY is oversold, and has triggered a “sell signal.”
  • Since Mid-caps are more impacted by supply chain impacts we are centering our portfolio strategy on domestic large caps until the “virus crisis” is resolved. We will then start picking through other areas for value.
  • MDY has broken all critical supports and is holding one of its last two “lines of defense.” It will ultimately fail and likely set lower lows. However, MDY is oversold enough for a counter-trend bounce to sell into. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • Previously: “EEM failed at resistance and we sold our exposures to international holdings and return our focus on large cap value for now.”
  • EEM has completed a “head and shoulders” topping pattern and violated support at the 61.8% retracement level. EEM will eventually test previous lows particularly with a sell signal now registered. 
  • EEM is very oversold short-term so use counter-trend rallies to sell into. 
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Sold positions
    • This Week: No position.
    • Stop-loss set at $40
  • Long-Term Positioning: Bearish

International Markets

  • Like EEM, EFA was also sold previously. as we return our focus back to large cap value.
  • EFA is very sold and on a deep sell signal. A reflexive rally is likely back to $65. Use that level to sell into.
  • Short-Term Positioning: Bearish – Market Risk Is High
    • Last Week: Sold positions
    • This Week: No position.
    • Stop-loss set at $61
  • Long-Term Positioning: Bearish

West Texas Intermediate Crude (Oil)

  • Last week, Russia failed to join OPEC+ in cutting production, and US drillers are producing more than current demand can offset. Drillers have to drill to make revenue to meet their debt obligations, so ultimately this is going to end very badly.
  • We nibbled around the energy sector previously, but with the break of the 2018 lows in oil prices, suggesting we are going to see sub-$40/bbl oil, we were stopped out of our trades.
  • On Friday we sold all energy related assets (AMLP, XOM, RDS.A).
  • We still like the sector from a “value” perspective and expect that we will wind up making a lot of money here. However, we were early, so we are going to step back and look for a better bottom to buy into. 
  • Short-Term Positioning: Bearish
    • Last Week: No positions
    • This Week: Sold All Holdings.
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • As noted last week: “Gold rallied sharply and broke out to new highs, suggesting there was something amiss with the stock market exuberance. The correction came this past week, confirming Gold’s message was correct.”
  • We previously sold our GDX position (people intensive) but are maintaining our gold position as a hedge to the overall portfolio.
  • We missed our entry on gold last week, as we never worked off the overbought condition enough. But support at $147.50 held.
  • Our positioning looks good, and if we get some follow through next week on a “reflexive rally,” it should allow us another opportunity to add to our positions. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions.
    • This week: Hold positions
    • Stop-loss for profits adjusted to $142.50, Look to buy at $147.50
    • Long-Term Positioning: Bullish

Bonds (Inverse Of Interest Rates)

  • Previously we stated: “As with Gold, Bonds were also suggesting something was amiss with the market. Bonds broke out to new highs this past week, and after adding exposure previously, the rally was a welcome hedge against stock market volatility.
  • While we sold our small position in TLT previously, the rest of our bond holdings have done the work of supporting the portfolio. 
  • Carl Swenlin at Decision Point agrees with our view: ““Price has accelerated into a parabolic advance, so we should be alert for a breakdown very soon. That doesn’t mean that we’ll see a complete collapse, but it is not likely that this vertical ascent will be maintained.”
  • We agree. Bonds are getting “stupid” overbought which suggests there is plenty of “fuel” for a pretty vicious “reflex rally” in stocks. At 5-standard deviations you are going to see a reversal in rates back to $150-152 on TLT. This is will be your next entry point to buy bonds and sell stocks.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Holding positions.
    • Stop-loss is moved up to $142.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • As noted previously: “This past week, the dollar surged through that resistance and is now extremely overbought short-term. Looking for a reflexive rally in stocks next week that pulls the dollar back towards the breakout level of last week.”
  • The early week rally in stocks pulled the dollar sharply lower and has now corrected a large chunk of the 3-standard-deviation extension to the upside. With the dollar back to oversold, it should find support near current levels to help support a reflexive rally in equities.
  • The dollar is close to triggering a sell signal, so be cautious with positioning, there is risk down to the 38.2% retracement level.

Major Market Buy/Sell Review: 03-02-20

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • As noted last week: “With the market now trading 12% above its 200-dma, and well into 3-standard deviations of the mean, a correction is coming. That correction started last Friday.”
  • We did add a position of VOOG to the Models this past week (a smidge early) as the markets are now extremely oversold short-term. We are looking for a bounce to initial resistance between $310 and $315 where we will likely sell and add a short-hedge back to the portfolio.
  • As noted previously, “extensions to this degree rarely last long without a correction.” Now the markets are extremely extended to the downside so a reflexive rally is likely. However, SPY will trigger a sell signal in the lower panel suggesting that any initial rally will fail and retest of support is likely.
  • Short-Term Positioning: Neutral Due To Extension
    • Last Week: Hold position
    • This Week: Added a “rental trade” of VOOG to portfolios.
    • Stop-loss adjusted to $290
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • The same situation exists with DIA.
  • Now back to extreme oversold, trading positions can be added for a counter-trend bounce back to resistance at $265-270.
  • DIA has triggered a “Sell signal” so rallies will most likely fail in the weeks ahead.
  • Short-Term Positioning: Neutral due to extensions
    • Last Week: Hold current positions
    • This Week: Add trading positions
    • Stop-loss adjusted to $250
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Despite the correction last week, the QQQ is the best looking index from a trading perspective.
  • As noted last week: “With the Nasdaq “buy signal” at extremely overbought levels, there is likely more correction to come.”
  • The correction this past week took the index back to oversold, and but the buy signal still remains fairly elevated.
  • Add a trading position in QQQ for a reflexive rally.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold position
    • This Week: Trading positions can be added.
    • Stop-loss set at $200
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • As we said last time: “Small caps have failed to participate with the markets and under performance is weighing on portfolios. The buy signal has continued to correct as small-caps are struggling to maintain recent support levels.”
  • As noted in our portfolio commentary, we sold our small-cap positions early last week.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Sold small cap. No positions.
    • Stop loss adjusted to $62
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • Last week we said: “MDY remains extremely extended above the 200-dma, so more corrective action is likely. MDY is still on a buy-signal but is pushing rather extreme deviations from long-term means.”
  • That all changed last week. Now MDY is oversold, and about to trigger a “sell signal.”
  • Since Mid-caps are more impacted by supply chain impacts we are centering our portfolio strategy on domestic large caps until the “virus crisis” is resolved. We will then start picking through other areas for value.
  • The previous breakout level held which is very bullish, so if the overbought condition can get worked off with some consolidation, we will have a good entry point to add exposure.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bullish

Emerging Markets

  • As we noted last week, EEM failed at resistance and we suggested we were going to reduce our exposure to international holdings and return our focus on large cap value for now.
  • Early last week, as noted in the Portfolio Commentary section, we sold emerging markets.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Sold position.
    • Stop-loss set at $40
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA was also sold early last week as we begin to return our focus back to large cap value.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Sold position.
    • Stop-loss set at $61
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • The brief rally in oil previously, failed and collapsed back to 2019 lows.
  • With oil approaching support at $42.50, and 3-standard deviations oversold, I suspect we are about to see a fairly vicious reflexive rally in oil. This will likely coincide with central bank interventions.
  • We started building positions in RDS/A last week, and we are going to add XLE to the ETF Model and add further to XOM and AMLP. These will initially be “rental trades” but there is value in the sector we are looking for longer-term if positions can hold.
  • We remain cautious and are “nibbling” on positions.
  • Short-Term Positioning: Neutral
    • Last Week: No positions
    • This Week: Added small amounts to AMLP and RDS/A.
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • As noted last week: “Gold rallied sharply and broke out to new highs, suggesting there was something amiss with the stock market exuberance.”
  • The correction came this past week, confirming Gold’s message was correct.
  • On Friday, we sold our GDX postion (people intensive) but are maintaining our gold position as a hedge to the overall portfolio.
  • We are watching this pullback. If gold gets oversold but doesn’t violate our support levels at $137.50 we will increase our gold holdings.
  • Our positioning looks good, but we are likely going to get a stock market bounce next week, allowing a better entry point to add to Gold positions.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions.
    • This week: Hold positions, sold Gold Miners (GDX)
    • Stop-loss for profits adjusted to $145, Look to buy at $137.50
    • Long-Term Positioning: Bullish

Bonds (Inverse Of Interest Rates)

  • As with Gold, Bonds were also suggesting something was amiss with the market. Bonds broke out to new highs this past week, and after adding exposure previously, the rally was a welcome hedge against stock market volatility.
  • We sold TLT this past week, just to take in some profits due to the extreme overbought condition of the market. If we get a counter-trend rally, we will likely get a pullback to support and can re-enter the trade when we hedge the rest of the equity portfolio.
  • Bonds have triggered a “buy” signal which suggests that we are not “out of the woods,” just yet, and a recession later this year is likely.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Sold TLT to take profits. Holding all other positions.
    • Stop-loss is moved up to $137.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • As noted previously: “This past week, the dollar surged through that resistance and is now extremely overbought short-term. Looking for a reflexive rally in stocks next week that pulls the dollar back towards the breakout level of last week.
  • While stocks didn’t rally just yet, I expect they will next week, the dollar started to correct its 3-standard-deviation extension to the upside.
  • The dollar decline should help Oil and commodities short-term, but don’t get too overly aggressive as we are very early in the entire process of what is happening economically.
  • Move slowly and carefully.
  • The “buy” signal has been triggered suggesting the dollar is going to move higher from here.

Major Market Buy/Sell Review: 02-24-20

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • As noted last week: “With the market now trading 12% above its 200-dma, and well into 3-standard deviations of the mean, a correction is coming.” That correction started last Friday.
  • Currently, there is a strong bias to “buy the dip” of every corrective action. We recognize this and given the S&P 500 hit initial support on Friday we did add 1/2 position of VOOG to the Dynamic Model. The model is underallocated to equities and has a short hedge so we are taking this opportunity to add slowly. However, we suspect there is more to this corrective action to come this week.
  • As noted previously, extensions to this degree rarely last long without a correction. The is more work to be done before the overbought and extended condition is corrected. We will look to add to our holdings during that process.
  • Short-Term Positioning: Neutral Due To Extension
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $320
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • As goes the S&P 500, goes the DIA, especially when MSFT & AAPL are the two top holdings and drivers of the advances in both indexes.
  • Like SPY, DIA is very overbought and extended from long-term means and the correction this past week has started to reverse that condition. Dow 30k will have to wait for now.
  • Wait for this correction to complete before adding further exposure.
  • Short-Term Positioning: Neutral due to extensions
    • Last Week: Hold current positions
    • This Week: Hold current positions
    • Stop-loss moved up to $280
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Despite the correction on Friday which centered on “big Tech,” it did little to reverse the extreme conditions of the market.
  • The correction this past week has not done nearly enough reversal to warrant adding exposure here.
  • With the Nasdaq “buy signal” at extremely overbought levels, there is likely more correction to come.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $215
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • Small caps have failed to participate with the markets and under performance is weighing on portfolios.
  • The buy signal has continued to correct as small-caps are struggling to maintain recent support levels.
  • We may remove our exposure to small-caps and focus our attention more on domestic large cap value for now.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop loss moved up to $69
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • MDY remains extremely extended above the 200-dma, so more corrective action is likely. MDY is still on a buy-signal but is pushing rather extreme deviations from long-term means.
  • The previous breakout level held which is very bullish, so if the overbought condition can get worked off with some consolidation, we will have a good entry point to add exposure.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bullish

Emerging Markets

  • EEM rallied and failed at resistance last week, which is concerning.
  • Like small-caps, we are going to reduce our exposure to international holdings and return our focus on large cap value for now.
  • The Dollar (Last chart) is also suggesting we reduce our exposure to international positioning. The dollar has reversed and broke out to new highs suggesting there is more upside to the dollar currently.
  • We are maintaining our holdings, but will likely remove our holdings soon.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $42
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA also rallied off support last week but failed at recent highs.
  • As with EEM, the key to our positioning is the US Dollar which is rallying strongly.
  • We are going to likely remove our international exposure soon and return our focus back to large cap value.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $67
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • Oil has rallied over the last week showing some signs of life. However, oil stocks have yet to reflect the improvement. We suspect they will soon if oil can continue to rise.
  • As noted last week, “Oil is extremely oversold so a counter-trend rally is highly likely.”
  • We got a little bounce this past week, but need follow through this week.
  • We remain on hold for now, but are getting more interested.
  • Short-Term Positioning: Neutral
    • Last Week: No positions
    • This Week: No positions
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • As noted last week: “Gold rallied sharply and broke out to new highs, suggesting there was something amiss with the stock market exuberance.”
  • The correction came this past week, confirming Gold’s message was correct.
  • On Friday, gold rallied sharply off support and with the buy signal intact, higher levels are likely.
  • Our positioning looks good, but we are likely going to get a stock market bounce next week, allowing a better entry point to add to Gold positions.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions.
    • This week: Hold positions
    • Stop-loss for whole position adjusted to $145
    • Long-Term Positioning: Bullish

Bonds (Inverse Of Interest Rates)

  • As with Gold, Bonds were also suggesting something was amiss with the market. Bonds broke out to new highs this past week, and after adding exposure previously, the rally was a welcome hedge against stock market volatility.
  • Hold positions for now, but look for a bit of correction before adding more weight.
  • Bonds are very close to triggering a sell-signal. Suggesting higher prices are likely (Lower yields)
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $136
    • Long-Term Positioning: Bullish

U.S. Dollar

  • As noted previously: “The dollar has rallied back to that all important previous support line. IF the dollar can break back above that level, and hold, then commodities, and oil, will likely struggle.”
  • This past week, the dollar surged through that resistance and is now extremely overbought short-term. Looking for a reflexive rally in stocks next week that pulls the dollar back towards the breakout level of last week.
  • The rising dollar is not bullish for Oil, commodities or international exposures. So watch carefully.
  • The “buy” signal has been triggered suggesting the dollar is going to move higher from here.

Major Market Buy/Sell Review: 02-17-20

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • As noted last week: “With the market now trading 12% above its 200-dma, and well into 3-standard deviations of the mean, a correction is coming.” But the belief is currently “more stimulus” will offset the “virus.” This is probably a wrong guess.
  • Extensions to this degree rarely last long without a correction.
  • Maintain exposures, but tighten up stop-losses.
  • Short-Term Positioning: Neutral Due To Extension
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $320
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • As goes the S&P 500, goes the DIA, especially when MSFT & AAPL are the two top holdings and drivers of the advances in both indexes.
  • Like SPY, DIA is very overbought and extended from long-term means.
  • Take profits, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral due to extensions
    • Last Week: Hold current positions
    • This Week: Hold current positions
    • Stop-loss moved up to $280
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • The Nasdaq remains “extremely” extended currently and is 21% above the long-term average which is historically rare. As noted last week, “With QQQ now pushing towards a 4-standard deviation event. A correction is inevitable, it is just a function of time now.”
  • The rally this week has pushed overbought conditions to extremes.
  • The Nasdaq “buy signal” is also back to extremely overbought levels. It is likely a correction is coming and it may be bigger than expected.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $215
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • Small caps corrected more than the major markets, but they also haven’t moved as much.
  • The buy signal has continued to correct as small-caps have struggled to maintain recent support levels.
  • Hold positions for now, but move stops up to recent lows.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop loss moved up to $69
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • MDY remains extremely extended above the 200-dma, so more corrective action is likely. MDY is still on a buy-signal but is pushing rather extreme deviations from long-term means.
  • The previous breakout level held which is very bullish, so if the overbought condition can get worked off with some consolidation, we will have a good entry point to add exposure.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bullish

Emerging Markets

  • EEM held support at the 200-dma which is encouraging, and the extended buy signal is getting worked off.
  • However, the Dollar (Last chart) is the key to our international positioning. The dollar has reversed its move lower and is rising which isn’t beneficial for international or commodity exposures.
  • Also, the coronavirus has yet to be priced into to global risk.
  • We are maintaining our holdings but tightening up stops.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $42
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA also rallied off support last week.
  • As we stated last week, “Any good news with the virus and international exposure should rally. EFA looks better than EEM, so we will likely revisit our holding on a rally.” Hopes of a containment of the contagion was what drove markets last week. This is likely fleeting.
  • As with EEM, the key to our positioning is the US Dollar which is rallying strongly.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $67
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • As noted last week:
  • “Oil completely broke down last week, and collapsed below all of the important levels. Oil is now testing critical support at $51. A failure there and a break into the low $40’s is probable.”
  • The support is barely holding and oil looks extremely weak. However, oil is extremely oversold so a counter-trend rally is highly likely. We got a little bounce this week, but not much.
  • We remain on hold for now, as stops are close to being triggered.
  • Short-Term Positioning: Neutral
    • Last Week: No positions
    • This Week: No positions
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • Gold rallied sharply and broke out to new highs, suggesting there was something amiss with the stock market exuberance.
  • On Friday, gold rallied holding support at the previous breakout level which is bullish.
  • Our positioning looks good particularly since gold has registered a new “buy signal.”
  • Short-Term Positioning: Neutral
    • Last week: Hold positions.
    • This week: Hold positions
    • Stop-loss for whole position adjusted to $138
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • The correction in bond prices we had previously suggested occurred as bonds broke out of their declining trend sending yields lower. That breakout was a decent entry point to add exposure to bonds if you need it. However, that opportunity has now passed.
  • Take profits and rebalance holdings and look for a trade on the equity side short-term. However, another trade for bonds is likely setting up shortly with a buy signal approaching. Be patient.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $136
    • Long-Term Positioning: Bullish

U.S. Dollar

  • As noted previously: “The dollar has rallied back to that all important previous support line. IF the dollar can break back above that level, and hold, then commodities, and oil, will likely struggle. It may be too early for a sharper dollar decline currently, as the U.S. economy is still the “cleanest shirt in the dirty laundry.”
  • That is exactly what happened over the last two weeks and the dollar has strengthened that rally as concerns over the “coronavirus” persist. With the dollar testing previous highs, a break above that resistance could result in a sharp move higher for the dollar.
  • The rising dollar is not bullish for Oil, commodities or international exposures.
  • The “sell” signal has began to reverse. Pay attention.

Major Market Buy/Sell Review: 02-10-20

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • As noted last week: “With the market now trading 12% above its 200-dma, and well into 3-standard deviations of the mean, a correction is coming.” That correction started last week, but was completely reversed this week with the market winding up right back where it started.
  • As noted, the sell-off barely registered in terms of reducing the overbought or extended levels of the market. There is likely a bit more correction to come to buy into so be patient.
  • We did add some short-term trading positions early in the week, but we will be patient to take on more weight.
  • Short-Term Positioning: Neutral Due To Extension
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $300
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • As goes the S&P 500, goes the DIA, especially when MSFT & AAPL are the two top holdings and drivers of the advances in both indexes.
  • Like SPY, the sell-off barely registered on the chart. The “buy” signal remains extremely extended along with a very overbought condition.
  • Take profits, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral due to extensions
    • Last Week: Hold current positions
    • This Week: Hold current positions
    • Stop-loss moved up to $275
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Like SPY, the sell-off on Friday barely registered. The Nasdaq remains “extremely” extended currently. As noted last week, “With QQQ now pushing towards a 4-standard deviation event. A correction is inevitable, it is just a function of time now.”
  • Despite the correction, nothing changed as the rally this week reversed the entire correction and the extension is now nearly 19% above the long-term mean.
  • The Nasdaq “buy signal” is also back to extremely overbought levels. It is likely a correction is coming and it may be bigger than expected.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $195
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • Small caps corrected more than the major markets, but they also haven’t moved as much.
  • The buy signal remains extended, but the index has corrected some of the short-term overbought.
  • The correction is trying to hold the previous breakout levels with a stop moved up to the 200-dma.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop loss moved up to $68
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • Like SLY, MDY also started to correct this past week.
  • MDY remains extremely extended above the 200-dma, so more corrective action is likely. MDY is working off the overbought condition and holding breakout support.
  • The previous breakout level needs to hold while the overbought condition is reversed.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bullish

Emerging Markets

  • EEM was more deeply impacted last week, and did hold stop levels at the 200-dma.
  • EEM is holding breakout level support at the moment and is oversold. However, the entire technical performance is a bit weak at the moment.
  • The Dollar (Last chart) is the key to our international positioning. The dollar looks to have reversed its move lower which isn’t beneficial for international exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $42
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA also sold off last week, and is testing important support.
  • As we stated last week, “Any good news with the virus and international exposure should rally. EFA looks better than EEM, so we will likely revisit our holding on a rally.”
  • That good news came, and EFA rallied as expected holding previous important support. EFA is working off the overbought condition but is still extended currently. Be patient.
  • As with EEM, the key to our positioning is the US Dollar which is beginning to rally.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $67
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • As noted last week:
  • “Oil completely broke down last week, and collapsed below all of the important levels. Oil is now testing critical support at $51. A failure there and a break into the low $40’s is probable.”
  • The support is barely holding and oil looks extremely weak. However, oil is extremely oversold so a counter-trend rally is highly likely.
  • We remain on hold for now, as stops are close to being triggered.
  • Short-Term Positioning: Neutral
    • Last Week: No positions
    • This Week: No positions
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • As noted last week, Gold had rallied sharply and broke out to new highs, suggesting there was something amiss with the stock market exuberance.
  • On Friday, gold rallied holding support at the previous breakout level which is bullish.
  • Our positioning looks good particularly since gold has registered a new “buy signal.”
  • We used the recent weakness to add to our GDX and IAU positions taking them back to full weightings.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions.
    • This week: Hold positions
    • Stop-loss for whole position adjusted to $137
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • The correction in bond prices we had previously suggested occurred as bonds broke out of their declining trend sending yields lower. That breakout was a decent entry point to add exposure to bonds if you need it. However, that opportunity has now passed.
  • Take profits and rebalance holdings and look for a trade on the equity side short-term. However, another trade for bonds is likely setting up shortly with a buy signal approaching. Be patient.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132
  • Long-Term Positioning: Bullish

U.S. Dollar

  • As noted previously: “The dollar has rallied back to that all important previous support line. IF the dollar can break back above that level, and hold, then commodities, and oil, will likely struggle. It may be too early for a sharper dollar decline currently, as the U.S. economy is still the “cleanest shirt in the dirty laundry.”
  • That is exactly what happened over the last two weeks and the dollar has strengthened that rally as concerns over the “coronavirus” persist. With the dollar close to testing previous highs, a break above that resistance could result in a sharp move higher for the dollar.
  • The rising dollar is not bullish for Oil, commodities or international exposures.
  • The “sell” signal has began to reverse. Pay attention.

Major Market Buy/Sell Review: 02-03-20

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

Over the last 3-weeks we have been warning of a pending correction due to the extreme overbought, extended, and overly bullish condition. All that was needed was a “catalyst” to trigger the correction which came in the form of a “Coronavirus.” This is a common theme in this week’s market update.

S&P 500 Index

  • As noted last week: “With the market now trading 12% above its 200-dma, and well into 3-standard deviations of the mean, a correction is coming.” That correction started last Friday and continued this week.
  • Even with the sell-off on Friday, it barely registered in terms of reducing the overbought or extended levels of the market. There is likely a bit more correction to come to buy into.
  • As noted we took profits in both the ETF and Equity Model (See Portfolio Commentary). We will likely have a much better entry point to buy into on a longer-term basis.
  • We may add a short-term trading position after we see where the market trades on Monday.
  • Short-Term Positioning: Neutral Due To Extension
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $300
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • As goes the S&P 500, goes the DIA, especially when MSFT & AAPL are the two top holdings and drivers of the advances in both markets. (We reduced both of those holdings last week.)
  • Like SPY, the sell-off on Friday barely registered on the chart. The “buy” signal remains extremely extended along with a very overbought condition.
  • Take profits, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral due to extensions
    • Last Week: Hold current positions
    • This Week: Hold current positions
    • Stop-loss moved up to $275
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Again, like SPY, the sell-off on Friday barely registered. Nasdaq remains “extremely” extended currently. As noted last week, “With QQQ now pushing towards a 4-standard deviation event. A correction is inevitable, it is just a function of time now.”
  • The Nasdaq “buy signal” is also back to extremely overbought levels so look for a correction to add exposure. As with SPY we may pick up a short-term trading position for a reflex rally but this will be trade, not an investment.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $195
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • Small caps corrected more than the major markets, but they also haven’t moved as much.
  • The buy signal remains extremely extended, but the index has corrected some of the short-term overbought.
  • Th correction needs to hold the previous breakout levels with a stop moved up to the 200-dma.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop loss moved up to $68
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • Like SLY, MDY also started to correct this past week.
  • MDY remains extremely extended above the 200-dma, so more corrective action is likely. MDY is getting oversold short-term so a bounce is likely.
  • The previous breakout level needs to hold while the overbought condition is reversed.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: No holding
    • This Week: No holding/May add a trading position for a reflex rally.
  • Long-Term Positioning: Bullish

Emerging Markets

  • EEM was more deeply impacted by the potential impact of the “Coronavirus.”
  • As noted previously, with the “buy signal” extremely extended, a correction is coming so be patient to add exposure assuming stop levels are not violated.”
  • Initial support failed and stop loss levels are coming quickly into focus. If there is good news on the virus front, EEM will bounce sharply. We will likely use that to sell our positions into.
  • The Dollar (Last chart) is the key to our international positioning. The dollar looks to have reversed its move lower which isn’t beneficial for international exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $43
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA also sold off last week, and is testing important support.
  • Any good news with the virus and international exposure should rally. EFA looks better than EEM, so we will likely revisit our holding on a rally.
  • As with EEM, the key to our positioning is the US Dollar.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $67
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • Oil completely broke down last week, and collapsed below all of the important levels. Oil is now testing critical support at $51. A failure there and a break into the low $40’s is probable.
  • As noted last week: “With oil prices falling back below $60/bbl, it is imperative that oil maintains the 200-dma support level which it is currently testing.” That level failed and prices plunged back towards recent lows.
  • This keeps us on hold for now from adding to positions and stops are close to being triggered.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions.
    • This Week: Hold positions
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • As noted last week, Gold had rallied sharply and broke out to new highs, suggesting there was something amiss with the stock market exuberance.
  • That was confirmed last week with the onset of the “Coronavirus” and the fall in the market.
  • On Friday, gold rallied to new highs once again as money sought safety from stocks. As noted last week: “If gold can muster a rally and break above recent highs, it is likely we will see a further advance.”
  • Our positioning looks good particularly since gold has registered a new “buy signal.”
  • We used the recent weakness to add to our GDX and IAU positions taking them back to full weightings.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions.
    • This week: Hold positions
    • Stop-loss for whole position adjusted to $137
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • As noted two weeks ago: “I suspect we are going to get some economic turmoil sooner, rather than later, which will lead to a correction in the equity markets and an uptick in bond prices.”
  • That occurred as bonds broke out of their declining trend sending yields lower. That breakout was a decent entry point to add exposure to bonds if you need it. However, that opportunity has now passed.
  • Take profits and rebalance holdings and look for a trade on the equity side short-term.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Take profits and rebalance holdings.
    • Stop-loss is moved up to $132
  • Long-Term Positioning: Bullish

U.S. Dollar

  • Previously, we noted the dollar broke down below both the 200-dma and the bullish trend line. It then retested, and failed, at that previous support level which confirms a breakdown in the dollar from its previous bullish channel.
  • As noted previously: “The dollar has rallied back to that all important previous support line. IF the dollar can break back above that level, and hold, then commodities, and oil, will likely struggle. It may be too early for a sharper dollar decline currently, as the U.S. economy is still the “cleanest shirt in the dirty laundry.”
  • That is exactly what happened last week and the dollar appears to be back in a bullish trend. Oil has collapsed, along with international exposures. We are close to triggering stops on all those positions.
  • The “sell” signal has began to reverse. Pay attention.

Major Market Buy/Sell Review: 1-27-20

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • As noted last week: “With the market now trading 12% above its 200-dma, and well into 3-standard deviations of the mean, a correction is coming.” That correction started on Friday.
  • Even with the sell-off on Friday, it barely registered in terms of reducing the overbought or extended levels of the market. There is likely a bit more correction to come to buy into.
  • As noted we took profits in both the ETF and Equity Model (See Portfolio Commentary). We will likely have a much better entry point in the next couple of months to buy into.
  • Short-Term Positioning: Neutral Due To Extension
    • Last Week: Hold position
    • This Week: Take profits and rebalance to target weights.
    • Stop-loss moved up to $300
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • As goes the S&P 500, goes the DIA, especially when MSFT & AAPL are the two top holdings and drivers of the advances in both markets. (We reduced both of those holdings last week.)
  • Like SPY, the sell-off on Friday barely registered on the chart. The “buy” signal remains extremely extended along with a very overbought condition.
  • Take profits, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral due to extensions
    • Last Week: Hold current positions
    • This Week: Take profits and rebalance risk.
    • Stop-loss moved up to $275
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Again, like SPY, the sell-off on Friday barely registered. Nasdaq remains “extremely” extended currently. As noted last week, “With QQQ now pushing towards a 4-standard deviation event. A correction is inevitable, it is just a function of time now.”
  • The Nasdaq “buy signal” is also back to extremely overbought levels so look for a correction to add exposure.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold position
    • This Week: Take profits and rebalance risks.
    • Stop-loss moved up to $195
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • Small caps corrected more than the major markets, but they also haven’t moved as much.
  • The buy signal remains extremely extended, and the index overbought, so there is likely more correction to come.
  • Th correction needs to hold the current support level while it works off the overextended buy signal. A failure here and the previous breakout levels will be the next important support and our stop level.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop loss moved up to $69
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • Like SLY, MDY also started to correct this past week.
  • MDY remains extremely extended and deviated above the 200-dma, so more corrective action is likely. Look for a reversal of the overbought condition to add to the index.
  • The previous breakout level needs to hold while the overbought condition is reversed.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bullish

Emerging Markets

  • EEM is just like every other market.
  • As noted last week, with the “buy signal” extremely extended, a correction is coming so be patient to add exposure assuming stop levels are not violated. That correction started on Friday.
  • Initial support is being tested and the market remains extremely overbought so be patient.
  • The Dollar (Last chart) is the key to our international positioning. The dollar looks to have confirmed a break lower, but has been strengthening as of late which is a negative for Oil and International Markets.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $43
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA rallied out of its consolidation channel, broke out, and has now rallied well into 3-standard deviation territory. The correction that started on Friday is extremely mild, so more correction is likely.
  • With EFA both EXTREMELY overbought and extended with the buy signal at levels which signaled the start of the short- to intermediate term correction.
  • As with EEM, the key to our positioning is the US Dollar.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $67
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • Oil completely broke down last week, and collapsed below all of the important levels.
  • As noted last week: “With oil prices falling back below $60/bbl, it is imperative that oil maintains the 200-dma support level which it is currently testing.” That level failed and prices plunged back towards recent lows.
  • This keeps us on hold for now from adding to positions and stops are close to being triggered.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions.
    • This Week: Hold positions
    • Stops Triggered for any direct crude oil positions.
  • Long-Term Positioning: Bearish

Gold

  • As noted last week, Gold had rallied sharply and broke out to new highs, suggesting there was something amiss with the stock market exuberance.
  • On Friday, gold rallied to new highs once again as money sought safety from stocks. As noted last week: “If gold can muster a rally and break above recent highs, it is likely we will see a further advance.”
  • Our positioning looks good particularly since gold has registered a new “buy signal.”
  • We used the recent weakness to add to our GDX and IAU positions taking them back to full weightings.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions.
    • This week: Hold positions
    • Stop-loss for whole position adjusted to $137
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • As noted last week: “I suspect we are going to get some economic turmoil sooner, rather than later, which will lead to a correction in the equity markets and an uptick in bond prices.”
  • That occurred last week as bond broke out of their declining trend sending yields lower. That breakout is a decent entry point to add exposure to bonds if you need it. Use a counter trend rally in stocks to pick up bond exposure if needed.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132
  • Long-Term Positioning: Bullish

U.S. Dollar

  • Previously, we noted the dollar broke down below both the 200-dma and the bullish trend line. It then retested, and failed, at that previous support level which confirms a breakdown in the dollar from its previous bullish channel.
  • As noted last week: “The dollar has rallied back to that all important previous support line. IF the dollar can break back above that level, and hold, then commodities, and oil, will likely struggle. It may be too early for a sharper dollar decline currently, as the U.S. economy is still the “cleanest shirt in the dirty laundry.”
  • The dollar has continued to test that overhead resistance and looks ready to make a move higher. Such a move will likely trigger stops on international, oil and commodity plays.
  • The “sell” signal remains intact currently suggesting there is further downside, if it begins to reverse that will be an important clue.

Major Market Buy/Sell Review: 1-21-20

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

This week’s analysis should be titled “Extreme Extension” week. You are going to see in multiple charts the same major deviation from long-term moving averages which have ALWAYS led to a corrective event in the past. Pay attention – risk is extremely elevated currently. Reduce portfolio risk and rebalance accordingly.

S&P 500 Index

  • With the market now trading 12% above its 200-dma, and well into 3-standard deviations of the mean, a correction is coming.
  • The “buy signal” (lower panel) is back to levels of extensions normally only seen with short-term tops and corrective actions, particularly when combined with extreme extensions and deviations from long-term means.
  • As noted we took profits in both the ETF and Equity Model (See Portfolio Commentary) and we still recommend taking profits and rebalancing risks in positions accordingly. We will likely have a much better entry point in the next couple of months to buy into.
  • Short-Term Positioning: Neutral Due To Extension
    • Last Week: Hold position
    • This Week: Take profits and rebalance to target weights.
    • Stop-loss moved up to $300
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • sAs goes the S&P 500, goes the DIA, especially when MSFT & AAPL are the two top holdings and drivers of the advances in both markets. (We reduced both of those holdings last week.)
  • The “buy” signal is extremely extended along with a very overbought condition.
  • Hold current positions and take profits, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral due to extensions
    • Last Week: Hold current positions
    • This Week: Take profits and rebalance risk.
    • Stop-loss moved up to $275
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Again, like SPY, the Nasdaq is just “extremely” extended currently. With QQQ now pushing towards a 4-standard deviation event. A correction is inevitable, it is just a function of time now.
  • The Nasdaq “buy signal” is also back to extremely overbought levels so look for a correction to add exposure.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold position
    • This Week: Take profits and rebalance risks.
    • Stop-loss moved up to $195
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • As noted above, small-caps have also pushed above 2-standard deviations of the 200-dma.
  • With the buy signal also extremely extended, and the index overbought, like all the other markets, a correction will provide a better entry point to add to our positions.
  • That correction has started and the current support level is being tested. A failure here and the previous breakout levels will be the next important support and our stop level.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop loss moved up to $69
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • Like SLY, MDY is also extremely extended and deviated above the 200-dma, and the market accelerated further into 3-standard deviation territory on Friday.
  • With MDY’s “buy” signal extremely extended, and very overbought, this is a prime setup for a correction. Hold off adding exposure until we see a better entry point.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bullish

Emerging Markets

  • EEM is just like every other market. The recent surge has taken it well into 3-standard deviation territory.
  • With the “buy signal” extremely extended, a correction is coming so be patient to add exposure assuming stop levels are not violated.
  • EEM has tested, and held the 61.8% Fibonacci retracement level, so if it can break above the recent high, that will continue the bullish trend.
  • The Dollar (Last chart) is the key to our international positioning. The dollar looks to have confirmed a break lower which should support our thesis of adding back international exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $43
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA rallied out of its consolidation channel, broke out, and has now rallied well into 3-standard deviation territory.
  • EFA is both EXTREMELY overbought and extended with the buy signal at levels which have normally preceded short- to intermediate term corrections.
  • As with EEM, the key to our positioning is the US Dollar.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $67
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • Oil finally broke above the downtrend resistance line from the 2018 highs, which was bullish, but unfortunately was not able to hold the breakout level.
  • With oil prices falling back below $60/bbl, it is imperative that oil maintains the 200-dma support level which it is currently testing. This keeps us on hold for now from adding to our positions until we get confirmation oil prices are going to hold.
  • As noted previously, with the short-term buy signal for oil is extended, the struggle we saw was not unexpected.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions.
    • This Week: Hold positions
    • Stop-loss for any existing positions is $58.
  • Long-Term Positioning: Bearish

Gold

  • Gold rallied sharply during the brief “Iran crisis” but has failed to breakout and hold new highs.
  • While gold is overbought short-term, the “buy signal” is very close to triggering. If gold can muster a rally and break above recent highs, it is likely we will see a further advance.
  • With gold now testing old highs, our positioning looks good particularly given that gold remains on a sell-signal currently. A reversal of the signal could suggest further highs to come.
  • We used the recent weakness to add to our GDX and IAU positions taking them back to full weightings.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions.
    • This week: Hold positions
    • Stop-loss for whole position adjusted to $137
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Bond prices rallied last week, again, and are testing downtrend resistance. For now bonds remain in a bearish channel, suggesting higher yields (lower prices) are still likely short-term.
  • I suspect we are going to get some economic turmoil sooner, rather than later, which will lead to a correction in the equity markets and an uptick in bond prices.
  • Use lower bounds of the downtrend, and the 200-dma, to add to holdings currently.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132
  • Long-Term Positioning: Bullish

U.S. Dollar

  • Previously, we noted the dollar broke down below both the 200-dma and the bullish trend line. It then retested, and failed, at that previous support level which confirms a breakdown in the dollar from its previous bullish channel.
  • Last week, the dollar has rallied back to that all important previous support line. IF the dollar can break back above that level, and hold, then commodities, and oil, will likely struggle.
  • As stated last time: “It may be too early for a sharper dollar decline currently, as the U.S. economy is still the “cleanest shirt in the dirty laundry.”
  • Be patient for now on commodity related exposures. Momentum still rules the market as a whole.
  • The “sell” signal remains intact currently suggesting there is further downside, if it begins to reverse that will be an important clue.

Major Market Buy/Sell Review: 1-13-20

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • On Friday, the market had a small drop after we took profits in our portfolios. However, that drop did little to resolve any of the overbought conditions which currently exisit.
  • The S&P remains more than 2-standard deviations above the 200-dma (shaded blue area).
  • The “buy signal” (lower panel) is back to levels of extensions normally only seen with short-term tops and corrective actions, particularly when combined with extreme extensions and deviations from long-term means.
  • As noted we took profits in both the ETF and Equity Model (See Portfolio Commentary) and we still recommend taking profits and rebalancing risks in positions accordingly. We will likely have a much better entry point in the next couple of months to buy into.
  • Short-Term Positioning: Neutral Due To Extension
    • Last Week: Hold position
    • This Week: Take profits and rebalance to target weights.
    • Stop-loss moved up to $300
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • As goes the S&P 500, goes the DIA, especially when MSFT & AAPL are the two top holdings and drivers of the advance in both markets. (We reduced both of those holdings last week.)
  • The “buy” signal is extremely extended along with a very overbought condition.
  • Hold current positions and take profits, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral due to extensions
    • Last Week: Hold current positions
    • This Week: Take profits and rebalance risk.
    • Stop-loss moved up to $275
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Again, like SPY, the Nasdaq is just “crazy” extended currently. With QQQ now pushing the limits of 3-standard deviations, a correction is inevitable, it is just a function of time now.
  • The Nasdaq “buy signal” is also back to extremely overbought levels so look for a correction to add exposure.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold position
    • This Week: Take profits and rebalance risks.
    • Stop-loss moved up to $195
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • As noted above, small-caps have also pushed above 2-standard deviations of the 200-dma.
  • With the buy signal also extremely extended, and the index overbought, like all the other markets, a correction will provide a better entry point to add to our positions.
  • That correction has started and the current support level is being tested. A failure here and the previous breakout levels will be the next important support and our stop level.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop loss moved up to $69
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • Like SLY, MDY is also extremely extended and deviated above the 200-dma, and it has started to correct a bit finally.
  • With MDY’s “buy” signal extremely extended, and very overbought, this is a prime setup for a correction. Hold off adding exposure until we see a better entry point.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bullish

Emerging Markets

  • EEM continues to underperform but did finally breakout above resistance. The next target will be the old highs.
  • With the “buy signal” extremely extended, the set up to add exposure is not present. Be patient for a correction that does not violate our stop.
  • EEM has tested, and held the 61.8% Fibonacci retracement level, so if it can break above the recent high, that will continue the bullish trend.
  • The Dollar (Last chart) is the key to our international positioning. The dollar looks to have confirmed a break lower which should support our thesis of adding back international exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $43
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA rallied out of its consolidation channel and broke out.
  • But, like EEM, the market is both EXTREMELY overbought and extended. Also, EFA is testing old highs which, as previously expected, is providing short-term resistance.
  • As with EEM, the key to our positioning is the US Dollar.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $67
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • Oil finally broke above the downtrend resistance line from the 2018 highs, which is bullish. However, the spurt from the “Iran spat,” shot oil prices to the 61.8% Fibonacci retracement level where it failed badly.
  • With oil prices falling back below $60/bbl, it is imperative that oil maintains the 200-dma support level.
  • As noted last week, with the short-term buy signal for oil is extended, the struggle we saw was not unexpected.
  • Add positions on weakness that doesn’t violate the 200-dma
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions.
    • This Week: Hold positions
    • Stop-loss for any existing positions is $58.
  • Long-Term Positioning: Bearish

Gold

  • Gold found its mojo last week, as Iran sparked fear in the markets. However, it faded a bit as tensions quickly dissapated.
  • With gold now testing old highs, our positioning looks good particularly given that gold remains on a sell-signal currently. A reversal of the signal could suggest further highs to come.
  • We used the recent weakness to add to our GDX and IAU positions taking them back to full weightings.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions.
    • This week: Hold positions
    • Stop-loss for whole position adjusted to $137
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Bond prices rallied last week, again, and are testing downtrend resistance. For now bonds remain in a bearish channel, suggesting higher yields are still likely short-term.
  • I suspect we are going to get some economic turmoil sooner, rather than later, which will lead to a correction in the equity markets and an uptick in bond prices. The weak employment and wages report last Friday suggested such may be coming.
  • Use lower bounds of the downtrend, and the 200-dma, to add to holdings currently.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132
  • Long-Term Positioning: Bullish

U.S. Dollar

  • Previously, we noted the dollar broke down below both the 200-dma and the bullish trend line. It then retested, and failed, at that previous support level which confirms a breakdown in the dollar from its previous bullish channel.
  • Last week, the dollar has rallied back to that all important previous support line. IF the dollar can break back above that level, and hold, then commodities, and oil, will likely struggle.
  • As stated last time: “It may be too early for a sharper dollar decline currently, as the U.S. economy is still the “cleanest shirt in the dirty laundry.”
  • Be patient for now on commodity related exposures. Momentum still rules the market as a whole.
  • The “sell” signal remains intact currently suggesting there is further downside, if it begins to reverse that will be an important clue.

Major Market Buy/Sell Review: 1-6-20

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • Despite the market not making much headway last week, the S&P is currently more than 2-standard deviations above the 200-dma (shaded blue area). You are going to see this extreme extension in several charts below.
  • The “buy signal” (lower panel) is back to levels of extensions normally only seen with short-term tops and corrective actions, particularly when combined with extreme extensions and deviations from long-term means.
  • Take profits and rebalance risks in positions accordingly. We will likely have a much better entry point in the next couple of months to buy into.
  • Short-Term Positioning: Neutral Due To Extension
    • Last Week: Hold position
    • This Week: Take profits and rebalance to target weights.
    • Stop-loss moved up to $300
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • So goes the S&P 500, so goes the DIA especially when MSFT & AAPL are the two top holdings and drivers of the advance in both markets.
  • The “buy” signal is extremely extended along with a very overbought condition.
  • Hold current positions, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral due to extensions
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $275
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Like SPY, the technology heavy Nasdaq has broken out to new highs but is pushing very extended levels. As noted with SPY above, the QQQ is more than 2-standard deviations above the 200-dma. This will likely not last long.
  • The Nasdaq “buy signal” is also back to extremely overbought levels so look for a consolidation or correction to add exposure.
  • The liquidity from the Fed has pushed markets to more dangerous levels. Be careful
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $195
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • As noted above, small-caps have also pushed above 2-standard deviations of the 200-dma.
  • With the buy signal also extremely extended, and the index overbought, like all the other markets, a correction will provide a better entry point to add to our positions.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop loss moved up to $69
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • Like SLY, MDY is also extremely extended and deviated above the 200-dma.
  • MDY’s “buy” signal is also extremely extended, as well being very overbought, which is a prime setup for a correction. Hold off adding exposure until we see a better entry point.
  • Short-Term Positioning: Neutral due to extensions.
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bullish

Emerging Markets

  • EEM continues to underperform but did finally breakout above resistance. The next target will be the old highs.
  • However, with the “buy signal” extremely extended, the set up to add exposure is not present. Be patient for a correction that does not violate our stop.
  • The Dollar (Last chart) is the key to our international positioning. The dollar looks to have confirmed a break lower which should support our thesis of adding back international exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $43
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA rallied out of its consolidation channel and broke out.
  • But, like EEM, the market is both EXTREMELY overbought and extended. Also, EFA is testing old highs which will likely provide short-term resistance.
  • As with EEM, the key to our positioning is the US Dollar.
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss set at $67
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • Oil finally broke above the downtrend resistance line from the 2018 highs, which is bullish. With Iran kicking up and a weaker dollar prospect, our recent oil adds, and desire to add more, seem to be the right call for now.
  • The short-term buy signal for oil is a bit extended and with oil testing the Fibonacci retracement level, we might see oil struggle in the next week or so. In the short-term it will be what happens in Iran that drives speculators, longer-term it will be the dollar.
  • Add positions on weakness that doesn’t violate the 200-dma
  • Short-Term Positioning: Neutral
    • Last Week: Hold positions.
    • This Week: Hold positions
    • Stop-loss for any existing positions is $58.
  • Long-Term Positioning: Bearish

Gold

  • Gold found its mojo last week, as Iran sparked fear in the markets.
  • With gold now testing old highs, our positioning looks good particularly given that gold remains on a sell-signal currently. A reversal of the signal could suggest further highs to come.
  • We used the recent weakness to add to our GDX and IAU positions taking them back to full weightings.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions.
    • This week: Hold positions
    • Stop-loss for whole position adjusted to $137
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Bond prices rallied last week, but failed at the downtrend resistance keeping bonds in a bearish channel for now, suggesting higher yields are still likely short-term.
  • I suspect we are going to get some economic turmoil sooner, rather than later, which will lead to a correction in the equity markets and an uptick in bond prices.
  • Use lower bounds of the downtrend, and the 200-dma, to add to holdings currently.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132
  • Long-Term Positioning: Bullish

U.S. Dollar

  • Last week, we noted the dollar broke down below both the 200-dma and the bullish trend line. It then retested, and failed, at that previous support level which confirms a breakdown in the dollar from its previous bullish channel.
  • This is an important development, as noted above, which supports our thesis on adding commodities, gold, energy, and international holdings to our portfolios.
  • However, while we are picking around the edges, it may be too early for a sharper dollar decline currently, as the U.S. economy is still the “cleanest shirt in the dirty laundry.” We will wait and watch closely.
  • The “sell” signal remains intact currently suggesting the sell-off could have some room to go.

Major Market Buy/Sell Review: 12-30-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • Surprise. No change from last week.
  • The “buy signal” has only gotten even more extended with the market severely overbought.
  • Maintain long bias currently as we head into the end of the year, particularly with the Fed flooding the system. However, be aware, that what the Fed is doing suggests something isn’t right with the system, so tighten up stops and pay attention to your holdings.
  • Given the deviation from the mean, and the more extreme overbought condition, we will likely add a short-market position to the portfolio. It is advisable to wait for some consolidation/correction before increasing equity allocations.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $300
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • Same story as the S&P 500.
  • The “buy” signal is getting even more extremely extended along with a very overbought condition.
  • Hold current positions, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $272.50
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Like SPY and DIA, the technology heavy Nasdaq has broken out to new highs and is even more extended than before.
  • The Nasdaq “buy signal” is also back to the second most overbought level since early this year. Look for a consolidation or correction to add exposure.
  • The liquidity from the Fed has pushed markets to more dangerous levels. Be careful. If we short the S&P 500 index to hedge our long positions, the Nasdaq can likewise be shorted.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $195
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • As noted previously, small-caps broke out above previous resistance and we added to our small cap exposure.
  • Performance since the addition has been unimpressive, but if this rally is going to continue, we should see some catch up.
  • Small caps are very overbought short-term, so a consolidation is needed that doesn’t break support or our stop level.
  • Short-Term Positioning: Bullish
    • Last Week: Added small-cap value SLYV
    • This Week: No change this week.
    • Stop loss moved up to $69
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • MDY has broken out to new highs, but like small caps relative performance has not been impressive.
  • MDY has a short-term “buy” signal, but needs a slight correction/consolidation to reduce the extreme overbought and extended condition. The buy signal is very extended as well.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bullish

Emerging Markets

  • EEM traded higher last week after breaking out of resistance.
  • With the “buy signal” extremely extended, the set up to add exposure is not opportunistic.
  • As we noted last week, PAY ATTENTION to the Dollar (Last chart). If the dollar is beginning a new leg higher, EEM and EFA will fail. However, that doesn’t seem to be the case and we added exposure to the sector.
  • Short-Term Positioning: Bearish
    • Last Week: Added positions of DEM
    • This Week: No change this week.
    • Stop-loss set at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA rallied out of its consolidation channel and broke out.
  • Like EEM, it and the market are both EXTREMELY overbought and EFA is testing old highs.
  • We used the breakout to add exposure to the sector selectively with a tight stop.
  • Short-Term Positioning: Neutral
    • Last Week: Added a position of EFV
    • This Week: No change from last week.
    • Stop-loss set at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • Oil is finally showing some signs of life by breaking above the downtrend resistance line from the 2018 highs.
  • There is a short-term buy signal for oil and with the break above the 200-dma we are looking to add XLE if it can confirm the breakout. We will review again next week once we get through the light trading of the holidays.
  • We previously added AMLP to portfolios.
  • Short-Term Positioning: Neutral
    • Last Week: Added 1/2 position of AMLP
    • This Week: No change this week.
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold got back to oversold and broke support at the 200-dma previously.
  • This past week, the dollar weakened a bit causing gold to shoot above resistance. A bullish short-term sign for gold.
  • We used the recent weakness to add to our GDX and IAU positions taking them back to full weightings.
  • Short-Term Positioning: Neutral
    • Last week: Took holdings back to full weights
    • This week: No change this week.
    • Stop-loss for whole position adjusted to $132.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Bond prices remain in the downtrend resistance keeping bonds in a bearish channel for now, suggesting higher yields are still likely short-term.
  • I suspect we are going to get some economic turmoil sooner, rather than later, which will lead to a correction in the equity markets and an uptick in bond prices.
  • Use lower bounds of the downtrend to add to holdings currently.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132
  • Long-Term Positioning: Bullish

U.S. Dollar

  • Last week, we noted the dollar broke down below both the 200-dma and the bullish trend line.
  • This is an important development. If the break holds, which it did NOT previously, this would bode well for commodities, gold, and hedges (not good for stocks.)
  • This past week the dollar failed at the bottom of that previous support suggesting more downside is possible.
  • However, while we are picking around the edges, it may be too early for a sharper dollar decline currently. We will wait and watch closely.
  • The “sell” signal remains intact currently suggesting the sell-off could have some room to go.

Major Market Buy/Sell Review: 12-23-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • No change from last week.
  • The “buy signal” remains extended with the market severely overbought.
  • Maintain long bias currently as we head into the end of the year, particularly with the Fed flooding the system. However, be aware, that what the Fed is doing suggests something isn’t right with the system, so tighten up stops and pay attention to your holdings.
  • Given the deviation from the mean, and the more extreme overbought condition, it is advisable to wait for some consolidation/correction before increasing equity allocations.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $300
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • DIA broke out to new highs this past week.
  • The “buy” signal is getting more extremely extended along with a very overbought condition.
  • Hold current positions, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $272.50
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Like SPY and DIA, the technology heavy Nasdaq has broken out to new highs but is pushing very extended levels.
  • The Nasdaq “buy signal” is also back to extremely overbought levels so look for a consolidation or correction to add exposure.
  • However, as with SPY, QQQ is EXTREMELY overbought short-term, so remain cautious adding exposure. A slight correction that alleviates some of the extension will provide a much better entry point.
  • The liquidity from the Fed has pushed markets to more dangerous levels. Be careful
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $195
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • As noted previously, small-caps broke out above previous resistance and we added to our small cap exposure again this past week.
  • This past week we added a small-cap value ETF to both the Equity & ETF Portfolios
  • We will wait to see where the next oversold trading opportunity sets up.
  • Short-Term Positioning: Bullish
    • Last Week: No position
    • This Week: Added small-cap value ETF – SLYV
    • Stop loss moved up to $69
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • MDY is holding up better than SLY and has broken out to new highs.
  • MDY has a short-term “buy” signal, but needs a slight correction/consolidation to reduce the extreme overbought and extended condition. The buy signal is very extended as well.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bullish

Emerging Markets

  • EEM continues to underperform but turned up with the conclusion of the trade deal and more QE.
  • With the “buy signal” extremely extended, the set up to add exposure was opportunistic.
  • As we noted last week, PAY ATTENTION to the Dollar (Last chart). If the dollar is beginning a new leg higher, EEM and EFA will fail. However, that doesn’t seem to be the case and we added exposure to the sector.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: Added Position of DEM to both Equity & ETF Portfolios
    • Stop-loss set at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA rallied out of its consolidation channel and broke out. WE can now look to add exposure opportunistically to portfolios.
  • Like EEM, it and the market are both EXTREMELY overbought and EFA is testing old highs.
  • We used the breakout to add exposure to the sector selectively with a tight stop.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: Added a position of EFV to both the Equity & ETF Portfolios
    • Stop-loss set at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • Oil is finally showing some signs of life by breaking above the downtrend resistance line from the 2018 highs.
  • There is a short-term buy signal for oil and with the break above the 200-dma we are looking to add XLE if it can confirm the breakout. We will review again next week.
  • Last week we added AMLP to portfolios as well.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: Added 1/2 position of AMLP
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold got back to oversold and broke support at the 200-dma previously.
  • This past week, the dollar strengthed a bit putting pressure on gold keeping it below resistance.
  • We used the recent weakness to add to our GDX and IAU positions taking them back to full weightings.
  • Short-Term Positioning: Neutral
    • Last week: Hold remaining position.
    • This week: Took holdings back to full weight.
    • Stop-loss for whole position adjusted to $132.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Bond prices ralliied last week, but failed at the downtrend resistance keeping bonds in a bearish channel for now, suggesting higher yields are still likely short-term.
  • I suspect we are going to get some economic turmoil sooner, rather than later, which will lead to a correction in the equity markets and an uptick in bond prices.
  • Use lower bounds of the downtrend to add to holdings currently.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132
  • Long-Term Positioning: Bullish

U.S. Dollar

  • Last week, we noted the dollar broke down below both the 200-dma and the bullish trend line.
  • This is an important development. If the break holds, which it did NOT previously, this would bode well for commodities, gold, and hedges (not good for stocks.)
  • This week the dollar rallied to bottom of that previous support, it if fails it will confirm a downside break and suggest lower dollar values. If not, we could see a high dollar which would put pressure on the burgeoning commodity bounce.
  • However, while we are picking around the edges, it may be too early for a sharper dollar decline currently. We will wait and watch closely.
  • The “sell” signal remains intact currently suggesting the sell-off could have some room to go.

Major Market Buy/Sell Review: 12-16-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • No change from last week.
  • With a “buy signal” triggered, there is a positive bias, however with both the price and “buy signal” very extended we expect a short-term correction for a better entry point to add exposure.
  • Given the deviation from the mean, and the more extreme overbought condition, it is advisable to wait for some consolidation/correction before increasing equity allocations.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position with a bias to add to holdings.
    • Stop-loss moved up to $300
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • DIA broke out to new highs with the reversal of the “buy” signal to the positive. However, that buy signal is pushing some of the higher levels seen historically so a correction is likely.
  • Hold current positions, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $270.00
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Like SPY and DIA, the technology heavy Nasdaq has broken out to new highs but is pushing very extended levels.
  • The Nasdaq “buy signal” is also back to extremely overbought levels so look for a consolidation or correction to add exposure.
  • However, as with SPY, QQQ is EXTREMELY overbought short-term, so remain cautious adding exposure. A slight correction that alleviates some of the extension will provide a much better entry point.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $195
  • Long-Term Positioning: Neutral due to valuations

S&P 600 Index (Small-Cap)

  • As noted previously, small-caps broke out above previous resistance but have been struggling.
  • Last week, small-caps successfully tested the breakout level, there is now a bias to add exposure.
  • This past week we added a small-cap value fund to the ETF Portfolio and are looking to increase that exposure opportunistically.
  • We will wait to see where the next oversold trading opportunity sets up.
  • Short-Term Positioning: Bullish
    • Last Week: No position
    • This Week: Added small-cap value fund 2% weight.
    • Stop loss set at $67
  • Long-Term Positioning: Neutral

S&P 400 Index (Mid-Cap)

  • MDY is holding up better than SLY and has broken out to new highs.
  • MDY has a short-term “buy” signal, but needs a slight correction/consolidation to reduce the extreme overbought and extended condition. The buy signal is very extended as well.
  • Look to add exposure to the market on a pullback that doesn’t violate support.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bullish

Emerging Markets

  • EEM continues to underperform but turned up with the conclusion of the trade deal and more QE.
  • With the “buy signal” extremely extended, the set up to add exposure here is not warranted. Watch the US Dollar for clues to EEM’s direction.
  • As we noted last week, PAY ATTENTION to the Dollar (Last chart). If the dollar is beginning a new leg higher, EEM and EFA will fail. However, that doesn’t seem to be the case and we are looking to add exposure to the sector.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position
    • Stop-loss set at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA rallied out of its consolidation channel and broke out. WE can now look to add exposure opportunistically to portfolios.
  • Like EEM, it and the market are both EXTREMELY overbought.
  • Be patient for now and wait for a slight correction to add holdings.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position.
    • Stop-loss set at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • Oil is finally showing some signs of life by breaking above the downtrend resistance line from the 2018 highs.
  • There is a short-term buy signal for oil and with the break above the 200-dma we are looking to add XLE if it can confirm the breakout.
  • Last week we added AMLP to portfolios as well.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: Added 1/2 position of AMLP
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold got back to oversold and broke support at the 200-dma previously.
  • This past week, the dollar weakened and gold improved its positioning.
  • We took the opportunity to take our GDX and IAU positions back to full weightings.
  • Short-Term Positioning: Neutral
    • Last week: Hold remaining position.
    • This week: Took holdings back to full weight.
    • Stop-loss for whole position adjusted to $132.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Bond prices had a nice rally on Friday but was not enough to reverse the sharp sell-off earlier in teh week.
  • Bonds remain in a downtrend currently, but are extremely oversold. I suspect that we are going to get some economic turmoil sooner, rather than later, which will lead to a correction in the equity markets and an uptick in bond prices.
  • Use any bounce to rebalance holdings.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • This past week, the dollar broke down below both the 200-dma and the bullish trend line.
  • This is an important development. If the break holds, which it did NOT previously, this would bode well for commodities, gold, and hedges (not good for stocks.)
  • However, while we are picking around the edges, it may be too early for a sharper dollar decline currently. We will wait and watch closely.
  • The “sell” signal remains intact currently suggesting the sell-off could have some room to go.

Major Market Buy/Sell Review: 12-09-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • With a “buy signal” triggered, there is a positive bias, however with both the price and “buy signal” very extended we expect a short-term correction for a better entry point to add exposure.
  • The correction on Monday and Tuesday was not enough to trigger an index “buy,” but was enough to require us to close out our “short S&P 500” index hedge for now in both the Equity and ETF portfolios. We took a small loss in the position but the rest of the portfolio continues to perform well. We will look to add the position back at a later date.
  • Given the deviation from the mean, and the more extreme overbought condition, it is advisable to wait for some consolidation/correction before increasing equity allocations.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position with a bias to add to holdings.
    • Stop-loss moved up to $290
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • DIA broke out to new highs with the reversal of the “buy” signal to the positive. However, that buy signal is pushing some of the higher levels seen historically so a correction is likely.
  • Despite the rally at the end of the week, DIA remains below its recent highs.
  • Hold current positions, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $265.00
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Like DIA, the technology heavy Nasdaq has broken out has did not get back above its recent at the end of the week. QQQ is pushing very extended levels.
  • The Nasdaq “buy signal” is also back to extremely overbought levels so look for a consolidation or correction to add exposure.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $185
  • Long-Term Positioning: Neutral

S&P 600 Index (Small-Cap)

  • As noted previously, small-caps broke out above previous resistance but have been struggling.
  • Last week, small-caps successfully tested the breakout level, there is now a bias to add exposure.
  • However, as suggested, be patient as these historical deviations tend not to last long. SLY is extremely overbought and deviated from its longer-term signals.
  • We are actively looking for a trading opportunity that sets up.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position.
    • Stop loss previously violated.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • MDY is holding up better than SLY and has not broken back down into its previous consolidation range.
  • MDY has now registered a short-term “buy” signal, but needs a slight correction/consolidation to reduce the extreme overbought and extended condition. The buy signal is very extended as well.
  • Look to add exposure to the market on a pullback that doesn’t violate support.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • EEM continues to underperform and failed to hold its breakout.
  • With the “buy signal” extremely extended, the set up to add exposure here is not warranted. Watch the US Dollar for clues to EEM’s direction.
  • As we noted last week, PAY ATTENTION to the Dollar (Last chart). If the dollar is beginning a new leg higher, EEM and EFA will fail.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position
    • Stop-loss violated at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like MDY, EFA rallied out of its consolidation channel and is holding that level but is struggling with previous resistance.
  • Like EEM, it and the market are both EXTREMELY overbought.
  • Be patient for now and wait for a confirmed breakout before adding exposure, and again, watch the U.S. Dollar for important clues.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position.
    • Stop-loss was violated at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • While commodities tend to perform well under liquidity programs due to their inherent leverage. Oil has continued to languish under the problems of over-supply and weak sector dynamics.
  • There is a short-term buy signal for oil, and oil prices finally rallied this week to the top of the downtrend channel. It is important for oil to break above $60 to set up a trade in the energy space.
  • We are starting to dig around the sector for some trading opportunities. Read our report on the site:
  • Collecting Tolls On The Energy Express
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold got back to oversold and broke support at the 200-dma previously.
  • We are sitting on our stop-loss for the position currently, and had previously sold half our position.
  • With the “QE4” back in play, the “safety trade” may be off the table for a while. So, if we get stopped out of our holdings, we will look to buy them back at lower levels.
  • Short-Term Positioning: Neutral
    • Last week: Hold remaining position.
    • This week: Hold remaining position.
    • Stop-loss for whole position adjusted to $132.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Like GLD, Bond prices also broke support and triggered a sell-signal.
  • However, this past week, as “trade deal turbulence” returned, bonds rallied back to the top of its current downtrend channel and are still holding support.
  • Watch your exposure and either take profits or shorten your duration in your portfolio for now.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • Despite much of the rhetoric to the contrary, the dollar remains in a strongly rising uptrend. Given a “strong dollar” erodes corporate profits on exports (which makes up 40% of corporate profits overall) a strong dollar combined with tariffs isn’t great for corporate bottom lines. Watch earnings carefully during this quarter.
  • The dollar continues to hold support at the 200-dma and the bottom of the uptrend. If the dollar rallies back to the top of its trend, which is likely, this will take the wind out of the emerging market, international, and oil plays.
  • The “sell” signal is also turning up. If it triggers a “buy” the dollar will likely accelerate pretty quickly.

Major Market Buy/Sell Review: 12-02-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • With a “buy signal” triggered, there is a positive bias, however with both the price and “buy signal” very extended we expect a short-term correction for a better entry point to add exposure.
  • As noted previously, we did add a “short S&P 500” index hedge to both the Equity and ETF portfolios. We are okay with the little bit of performance drag it provides relative to the risk reduction we get in the portfolio.
  • Given the deviation from the mean, and the more extreme overbought condition, it is advisable to wait for some consolidation/correction before increasing equity allocations.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position with a bias to add to holdings.
    • Stop-loss moved up to $290
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • DIA broke out to new highs with the reversal of the “buy” signal to the positive. However, that buy signal is pushing some of the higher levels seen historically so a correction is likely.
  • Hold current positions, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $265.00
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Like SPY and DIA, the technology heavy Nasdaq has broken out to new highs but is pushing very extended levels.
  • The Nasdaq “buy signal” is also back to extremely overbought levels so look for a consolidation or correction to add exposure.
  • However, as with SPY, QQQ is EXTREMELY overbought short-term, so remain cautious adding exposure. A slight correction that alleviates some of the extension will provide a much better entry point.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $185
  • Long-Term Positioning: Neutral

S&P 600 Index (Small-Cap)

  • As noted previously, small-caps broke out above previous resistance but have been struggling.
  • Last week, small-caps successfully tested the breakout level, there is now a bias to add exposure.
  • However, as suggested, be patient as these historical deviations tend not to last long. SLY is extremely overbought and deviated from its longer-term signals.
  • We will wait to see where the next oversold trading opportunity sets up.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position.
    • Stop loss previously violated.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • MDY is holding up better than SLY and has not broken back down into its previous consolidation range.
  • MDY has now registered a short-term “buy” signal, but needs a slight correction/consolidation to reduce the extreme overbought and extended condition. The buy signal is very extended as well.
  • Look to add exposure to the market on a pullback that doesn’t violate support.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • EEM continues to underperform and failed to hold its breakout.
  • With the “buy signal” extremely extended, the set up to add exposure here is not warranted. Watch the US Dollar for clues to EEM’s direction.
  • As we noted last week, PAY ATTENTION to the Dollar (Last chart). If the dollar is beginning a new leg higher, EEM and EFA will fail.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position
    • Stop-loss violated at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like MDY, EFA rallied out of its consolidation channel and is holding that level but is struggling with previous resistance.
  • Like EEM, it and the market are both EXTREMELY overbought.
  • Be patient for now and wait for a confirmed breakout before adding exposure, and again, watch the U.S. Dollar for important clues.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position.
    • Stop-loss was violated at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • While commodities tend to perform well under liquidity programs due to their inherent leverage. Oil has continued to languish under the problems of over-supply and weak sector dynamics.
  • There is a short-term buy signal for oil, but the price failed at the downtrend and has now broken back down below the 200-dma.
  • We are starting to dig around the sector for some trading opportunities, but setups look terrible. We will keep you appraised in our weekly position report.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold got back to oversold and broke support at the 200-dma previously.
  • We are sitting on our stop-loss for the position currently, and had previously sold half our position.
  • With the “QE4” back in play, the “safety trade” may be off the table for a while. So, if we get stopped out of our holdings, we will look to buy them back at lower levels.
  • Short-Term Positioning: Neutral
    • Last week: Hold remaining position.
    • This week: Hold remaining position.
    • Stop-loss for whole position adjusted to $132.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Like GLD, Bond prices also broke support and triggered a sell-signal.
  • However, this past week, as “trade deal turbulence” returned, bonds rallied back to the top of its current downtrend channel.
  • Watch your exposure and either take profits or shorten your duration in your portfolio for now.
  • As noted last week, with the oversold condition in place, the bounce we were looking for arrived. Given bonds are still oversold, an equity correction will like move bond prices higher short-term. Use any bounce to rebalance holdings.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • Despite much of the rhetoric to the contrary, the dollar remains in a strongly rising uptrend. Given a “strong dollar” erodes corporate profits on exports (which makes up 40% of corporate profits overall) a strong dollar combined with tariffs isn’t great for corporate bottom lines. Watch earnings carefully during this quarter.
  • Furthermore, the dollar bounced off support of the 200-dma and the bottom of the uptrend. If the dollar rallies back to the top of its trend, which is likely, this will take the wind out of the emerging market, international, and oil plays.
  • The “sell” signal is also turning up. If it triggers a “buy” the dollar will likely accelerate pretty quickly.

Major Market Buy/Sell Review: 11-25-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • With a “buy signal” triggered, there is a positive bias, however with both the price and “buy signal” very extended we expect a short-term correction for a better entry point to add exposure.
  • As noted previously, we did add a “short S&P 500” index hedge to both the Equity and ETF portfolios. We are okay with the little bit of performance drag it provides relative to the risk reduction we get in the portfolio.
  • Given the deviation from the mean, and the more extreme overbought condition, it is advisable to wait for some consolidation/correction before increasing equity allocations.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position with a bias to add to holdings.
    • Stop-loss moved up to $290
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • DIA broke out to new highs with the reversal of the “buy” signal to the positive. However, that buy signal is no pushing some of the higher levels seen historically so a correction is likely.
  • Hold current positions, but as with SPY, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $265.00
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Like SPY and DIA, the technology heavy Nasdaq has broken out to new highs but is pushing very extended levels.
  • The Nasdaq “buy signal” is also back to extremely overbought levels so look for a consolidation or correction to add exposure.
  • However, as with SPY, QQQ is EXTREMELY overbought short-term, so remain cautious adding exposure. A slight correction that alleviates some of the extension will provide a much better entry point.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $185
  • Long-Term Positioning: Neutral

S&P 600 Index (Small-Cap)

  • As noted previously, small-caps broke out above previous resistance but have been struggling.
  • Last week, small-caps failed to hold the breakout which puts us back on cautionary footing for the market.
  • We suggested being patient on adding exposure as these historical deviations tend not to last long. SLY is extremely overbought and deviated from its longer-term signals. That turned out to be correct for now.
  • We will wait to see where the next oversold trading opportunity sets up.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position.
    • Stop loss previously violated.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • MDY is holding up better than SLY and has not broken back down into its previous consolidation range.
  • MDY has now registered a short-term “buy” signal, but needs a slight correction/consolidation to reduce the extreme overbought and extended condition. The buy signal is very extended as well.
  • Look to add exposure to the market on a pullback that doesn’t violate support.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • Like SLY, EEM continues to underperform and failed to hold its breakout.
  • With the “buy signal” extremely extended, the set up to add exposure here is not warranted. Watch the US Dollar for clues to EEM’s direction.
  • As we noted last week, PAY ATTENTION to the Dollar (Last chart). If the dollar is beginning a new leg higher, EEM and EFA will fail.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position
    • Stop-loss violated at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like MDY, EFA rallied out of its consolidation channel and is holding that level but failed at previous resistance.
  • Like EEM, a the “buy signal” and market are both EXTREMELY overbought.
  • Be patient for now and wait for a confirmed breakout before adding exposure, and again, watch the U.S. Dollar for important clues.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position.
    • Stop-loss was violated at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • The week saw an uptick in oil prices as “speculation” returned to the markets from QE4. A nice bottom has been forming for oil prices between $51-52 so look for a move to the upper downtrend line at $59.
  • Commodities tend to perform well under liquidity programs due to their inherent leverage. So we are looking to add exposure to energy holdings.
  • Don’t get too excited, there is not much going on with oil currently, but there is likely a tradeable opportunity approaching given the deeply oversold conditions.
  • We are starting to dig around the sector for some trading opportunities. We will keep you appraised in our weekly position report.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold got back to oversold and broke support at the 200-dma previously.
  • We are sitting on our stop-loss for the position currently, and had previously sold half our position.
  • With the “QE4” back in play, the “safety trade” may be off the table for a while. So, if we get stopped out of our holdings, we will look to buy them back at lower levels.
  • Short-Term Positioning: Neutral
    • Last week: Hold remaining position.
    • This week: Hold remaining position.
    • Stop-loss for whole position moved up to $137.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Like GLD, Bond prices also broke support and triggered a sell-signal.
  • However, this past week, as “trade deal turbulence” returned, bonds rallied back to the top of its current downtrend channel.
  • Watch your exposure and either take profits or shorten your duration in your portfolio for now.
  • As noted last week, with the oversold condition in place, the bounce we were looking for arrived. Given bonds are still oversold, an equity correction will like move bond prices higher short-term. Use any bounce to rebalance holdings.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • Despite much of the rhetoric to the contrary, the dollar remains in a strongly rising uptrend. Given a “strong dollar” erodes corporate profits on exports (which makes up 40% of corporate profits overall) a strong dollar combined with tariffs isn’t great for corporate bottom lines. Watch earnings carefully during this quarter.
  • Furthermore, the dollar bounced off support of the 200-dma and the bottom of the uptrend. If the dollar rallies back to the top of its trend, which is likely, this will take the wind out of the emerging market, international, and oil plays.
  • The “sell” signal is also turning up. If it triggers a “buy” the dollar will likely accelerate pretty quickly.

Major Market Buy/Sell Review: 11-18-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

S&P 500 Index

  • With a “buy signal” triggered, there is a positive bias and with the breakout there is the only resistance to the upside is the more extreme deviation from the 200-dma, which got even more extended this past week.
  • As noted last week, we did add a “short S&P 500” index hedge to both the Equity and ETF portfolios. We are okay with the little bit of performance drag it provides relative to the risk reduction we get in the portfolio.
  • Given the deviation from the mean, and the more extreme overbought condition, it is advisable to wait for some consolidation/correction before increasing equity allocations.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position with a bias to add to holdings.
    • Stop-loss moved up to $290
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • DIA broke out to new highs with the reversal of the “buy” signal to the positive.
  • Hold current positions, but as with SPY, with the very overbought short-term condition, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $265.00
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Like SPY, the technology heavy Nasdaq also broke out to new highs.
  • We noted previously that with the “sell signal” reversed, positions could be added. The Nasdaq is not to overbought to take that risk. Wait for a correction to add holdings.
  • However, as with SPY, QQQ is EXTREMELY overbought short-term, so remain cautious adding exposure. A slight correction that alleviates some of the extension will provide a much better entry point.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $185
  • Long-Term Positioning: Neutral

S&P 600 Index (Small-Cap)

  • Small-caps broke out above previous resistance but has been struggling. Last week, the dollar took some steam out of small caps and it is testing the breakout level. It is now “make or break” for small-caps to rally off this support.
  • Be patient on adding exposure, it may seem like you are missing out, but these historical deviations tend not to last long. SLY is extremely overbought and deviated from its longer-term signals.
  • We are looking to potentially add a trading position but need a slight correction/consolidation to do so.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position.
    • Stop loss previously violated.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • MDY is the same as SLY.
  • MDY has now registered a short-term “buy” signal, but needs a slight correction/consolidation to reduce the extreme overbought and extended condition.
  • Look to add exposure to the market on a pullback that doesn’t violate support.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • EEM continues to underperform. However, as noted last week, QE4 has pushed EEM sharply higher over the last week.
  • While the spurt higher did break above resistance, it failed to hold last week as the US Dollar rallied.
  • EEM is back to extreme overbought. So be patient on adding a position until we confirm if the breakout holds..
  • We are looking to add a trading position on a pullback that holds support.
  • As we noted last week, PAY ATTENTION to the Dollar (Last chart). If the dollar is beginning a new leg higher, EEM and EFA will fail.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position
    • Stop-loss violated at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA also spurted higher.
  • Like EEM, a buy signal has been triggered and is back to EXTREMELY overbought.
  • Be patient for now and wait for a confirmed breakout before adding exposure, and again, watch the U.S. Dollar for important clues.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position.
    • Stop-loss was violated at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • The week saw an uptick in oil prices as “speculation” returned to the markets from QE4. A nice bottom has been forming for oil prices between $51-52 so look for a move to the upper downtrend line at $59/
  • Commodities tend to perform well under liquidity programs due to their inherent leverage. So we are looking to add exposure to energy holdings.
  • Don’t get too excited, there is not much going on with oil currently, but there is likely a tradeable opportunity approaching given the deeply oversold conditions.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold got back to oversold and broke support at the 200-dma this past week.
  • We are sitting on our stop-loss for the position currently, and had previously sold half our position.
  • With the “QE4” back in play, the “safety trade” may be off the table for a while. So, if we get stopped out of our holdings, we will look to buy them back at lower levels.
  • Short-Term Positioning: Neutral
    • Last week: Hold remaining position.
    • This week: Hold remaining position.
    • Stop-loss for whole position moved up to $137.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Like GLD, Bond prices also broke support and triggered a sell-signal.
  • Watch your exposure and either take profits or shorten your duration in your portfolio.
  • As noted last week, with the oversold condition in place, we got the bounce we were looking for. Given bonds are still oversold, an equity correction will like move bond prices higher short-term. Use any bounce to rebalance holdings.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • Despite much of the rhetoric to the contrary, the dollar remains in a strongly rising uptrend. Given a “strong dollar” erodes corporate profits on exports (which makes up 40% of corporate profits overall) a strong dollar combined with tariffs isn’t great for corporate bottom lines. Watch earnings carefully during this quarter.
  • Furthermore, the dollar bounced off support of the 200-dma and the bottom of the uptrend. If the dollar rallies back to the top of its trend, which is likely, this will take the wind out of the emerging market, international, and oil plays.
  • The “sell” signal is also turning up. If it triggers a “buy” the dollar will likely accelerate pretty quickly.

Major Market Buy/Sell Review: 11-11-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

This update focuses on the impact the “trade deal” announced on Friday will have on each market going forward.

S&P 500 Index

  • With a “buy signal” triggered, there is a positive bias and with the breakout there is the only resistance to the upside is the more extreme deviation from the 200-dma.
  • Given that deviation from the mean, and the more extreme overbought condition, it is advisable to wait for some consolidation/correction before increasing equity allocations.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position with a bias to add to holdings.
    • Stop-loss remains at $285
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • DIA broke out to new highs this week with a reversal of the “buy” signal to the positive.
  • Hold current positions, but as with SPY, with the very overbought short-term condition, wait for a correction before adding further exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $260.00
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • Like SPY, the technology heavy Nasdaq also broke out to new highs.
  • With the “sell signal” now reversed, positions can be added.
  • However, as with SPY, QQQ is EXTREMELY overbought short-term, so remain a cautious adding exposure. A slight correction that alleviates some of the extension will provide a much better entry point.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $185
  • Long-Term Positioning: Neutral

S&P 600 Index (Small-Cap)

  • One of the markets which historically performed the best under QE is small caps.
  • However, while small-caps have popped on a lot of short-covering, it has barely broken out above previous resistance. More importantly, the index is now back to more extreme overbought conditions.
  • Be patient on adding exposure, it may seem like you are missing out, but these historical deviations tend not to last long.
  • We are looking to potentially add a trading position but need a slight correction/consolidation to do so.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position.
    • Stop loss previously violated.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • MDY is the same as SLY.
  • MDY has now registered a short-term “buy” signal, but needs a slight correction/consolidation to reduce the extreme overbought and extended condition.
  • Look to add exposure to the market on a pullback that doesn’t violate support.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • EEM continues to underperform. However, as noted last week, QE4 has pushed EEM sharply higher over the last week.
  • The current spurt higher did break above resistance, but EEM is back to extreme overbought. So be patient on adding a position until we confirm the breakout is sustainable.
  • We are looking to add a trading position on a pullback that holds support.
  • However, PAY ATTENTION to the Dollar (Last chart). If the dollar is beginning a new leg higher, EEM and EFA will fail.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position
    • Stop-loss violated at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA also spurted higher.
  • Like EEM, a buy signal has been triggered and is back to EXTREMELY overbought.
  • Be patient for now and wait for a confirmed breakout before adding exposure, and again, watch the U.S. Dollar for important clues.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position.
    • Stop-loss was violated at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • The week saw an uptick in oil prices as “speculation” returned to the markets from QE4. A nice bottom has been forming for oil prices between $51-52 so look for a move to the upper downtrend line at $59/
  • Commodities tend to perform well under liquidity programs due to their inherent leverage. So we are looking to add exposure to energy holdings.
  • Don’t get too excited, there is not much going on with oil currently, but there is likely a tradeable opportunity approaching given the deeply oversold conditions.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold got back to oversold and broke support at the 200-dma this past week.
  • We are sitting on our stop-loss for the position currently, and had previously sold half our position.
  • With the “QE4” back in play, the “safety trade” may be off the table for a while. So, if we get stopped out of our holdings, we will look to buy them back at lower levels.
  • Short-Term Positioning: Neutral
    • Last week: Hold remaining position.
    • This week: Hold remaining position.
    • Stop-loss for whole position moved up to $137.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Like GLD, Bond prices also broke support and triggered a sell-signal.
  • Watch your exposure and either take profits or shorten your duration in your portfolio.
  • With the oversold condition in place, we will likely get a bounce to rebalance holdings a bit into. So remain patient for now.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $132.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • Despite much of the rhetoric to the contrary, the dollar remains in a strongly rising uptrend. Given a “strong dollar” erodes corporate profits on exports (which makes up 40% of corporate profits overall) a strong dollar combined with tariffs isn’t great for corporate bottom lines. Watch earnings carefully during this quarter.
  • Furthermore, the dollar bounced off support of the 200-dma and the bottom of the uptrend. If the dollar rallies back to the top of its trend, which is likely, this will take the wind out of the emerging market, international, and oil plays.
  • The “sell” signal is also turning up. If it triggers a “buy” the dollar will likely accelerate pretty quickly.

Major Market Buy/Sell Review: 11-04-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

This update focuses on the impact the “trade deal” announced on Friday will have on each market going forward.

S&P 500 Index

  • With the Fed’s QE back in play, the S&P 500 finally broke out to all-time highs this past week.
  • With a “buy signal” triggered, there is a positive bias and with the noted breakout, we simply need a reasonable entry point to add exposure. Look for a consolidation or pullback which reduces the short-term extreme overbought condition.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position with a bias to add to holdings.
    • Stop-loss remains at $285
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • DIA has not yet made new highs with conviction.
  • DIA has reversed its previous “Sell signal” and remains in an uptrend.
  • Hold current positions, but wait for confirmation of a breakout before adding more broad market exposure. With markets very overbought short-term a correction is likely before a further advance.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $260.00
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • The technology heavy Nasdaq also broke out to new highs this past week along with the S&P 500.
  • The “Sell signal” was also reversed, so positions can be added opportunistically.
  • QQQ is back to EXTREME overbought short-term so remain a cautious adding exposure. A correction is likely which will provide a much better entry point.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $185
  • Long-Term Positioning: Neutral

S&P 600 Index (Small-Cap)

  • One of the markets which historically perform the best under QE is small caps.
  • However, while small-caps have popped on a lot of short-covering, it failed to get above the resistance. With the index now back to overbought, be patient on adding exposure until a confirmed break above resistance is in place.
  • We are looking to potentially add a trading position but need confirmation the recent rally isn’t just another trap.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position.
    • Stop loss previously violated.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • MDY, unlike SLY, finally broke above downtrend resistance on Friday.
  • MDY has now registered a short-term “buy” signal, but needs to be confirmed by a solid break above resistance. That has yet to occur, so be patient for now.
  • MDY is back to overbought so, like small-caps, it is make or break if mid-caps are going to make a move higher.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • EEM continues to underperform. However, as noted last week, QE4 has pushed EEM sharply higher over the last week.
  • The current spurt higher is trying to break above resistance, but EEM is back to extremely overbought. So be patient on adding a position until we confirm the breakout is sustainable.
  • As noted previously we closed out of out trading position to the long-short portfolio due to lack of performance.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position
    • Stop-loss violated at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA also spurted higher.
  • EFA remains in a downtrend and is testing the top of that range. Like EEM, a buy signal has been triggered and is back to EXTREMELY overbought.
  • Be patient for now and wait for a confirmed breakout before adding exposure.
  • As with EEM, we closed out of previous trading positions due to lack of performance.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position.
    • Stop-loss was violated at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • The week saw an uptick in oil prices as “speculation” returned to the markets from QE4. Commodities tend to perform well under liquidity programs due to their inherent leverage.
  • Don’t get too excited, there is not much going on with oil currently, but there is likely a tradeable opportunity approaching given the deeply oversold conditions.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold got back to a slight oversold last week, and held. However, it is forming a bit of a downtrend from recent highs.
  • With the “QE4” back in play, the “safety trade” may be off the table for a while. We are moved our stops up and took half our position out of the portfolio previously.
  • Short-Term Positioning: Neutral
    • Last week: Hold remaining position.
    • This week: Hold position.
    • Stop-loss for whole position moved up to $137.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Like GLD, Bond prices rallied a bit this past week from the oversold condition.
  • We are close to registering a “sell” signal which could pressure bond prices lower, so be cautious for now and keep stops in place.
  • As with GLD, we are also moving up our stop-loss to protect our gains if the “risk on” trade gets some real traction.
  • With the oversold condition in place, we will likely be able to further add to holdings as we head into the end of the year. But we aren’t there yet, so be patient for now.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $137.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • The dollar had rallied to our $99 target which we laid out back in June of this year when we started tracking the dollar.
  • Despite hopes to the contrary, the dollar remains in a strongly rising uptrend. Given a “strong dollar” erodes corporate profits on exports (which makes up 40% of corporate profits overall) a strong dollar combined with tariffs isn’t great for corporate bottom lines. Watch earnings carefully during this quarter.
  • As noted last week, the dollar is back to the bottom of its uptrend and is very oversold. We suggested a rally in the dollar was likely, which we saw a bit of bounce last week. That could well continue this week, and a tradeable opportunity is available.
  • The “buy” signal keeps us dollar bullish for now.

Major Market Buy/Sell Review: 10-28-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

This update focuses on the impact the “trade deal” announced on Friday will have on each market going forward.

S&P 500 Index

  • We are maintaining our core equity positions for now as the bullish trend remains intact. Read this past weekend’s newsletter for more commentary on the Fed’s “Not QE.”
  • With a “buy signal” triggered, there is a positive bias. However, as noted last week, without the market breaking out to new highs the previous resistance and overbought condition suggests a near-term correction is possible.
  • We will wait for a confirmation breakout to add to our core equity holdings as needed.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position.
    • Stop-loss remains at $285
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • Like the SPY, DIA broke failed at previous highs.
  • DIA has not reversed its previous “Sell signal” yet, but does remain in a positive trend.
  • Hold current positions, but wait for confirmation of a breakout before adding more broad market exposure. With markets very overbought short-term a correction is likely before a further advance.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $260.00
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • The technology heavy Nasdaq is once again testing its all-time highs.
  • The “Sell signal” is close to being reversed, but only barely so. QQQ needs to break out to new highs to confirm the bullish trend.
  • QQQ is back to EXTREME overbought short-term so remain a cautious adding exposure. A correction is likely which will provide a much better entry point.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $185
  • Long-Term Positioning: Neutral

S&P 600 Index (Small-Cap)

  • One of the markets which historically perform the best under QE is small caps.
  • This past week, small-caps popped on a lot of short-covering but failed to get above the downtrend resistance. Fortunately, the index is not extremely overbought yet so next week will be make or break for the current consolidation.
  • We are looking to potentially add a trading position but need confirmation the recent rally isn’t just another trap.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position.
    • Stop loss previously violated.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • MDY, like SLY, is trapped within both a downtrend and sideways consolidation.
  • MDY has now registered a short-term “buy” signal, but needs to be confirmed by a break above resistance. That has yet to occur, so be patient for now.
  • MDY is back to overbought so, like small-caps, it is make or break if mid-caps are going to make a move higher.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • EEM continues to underperform. However, as noted last week, QE4 will likely bleed into EEM if a performance chase begins for year-end positioning.
  • The current spurt higher is trying to break above the long-term downtrend, but EEM is back to extremely overbought. So be patient on adding a position until we confirm the breakout is sustainable.
  • The sell signal reversed to a buy last week, so with the breakout, there is potential for EEM. However, be patient to confirm the breakout is valid.
  • As noted previously we closed out of out trading position to the long-short portfolio due to lack of performance.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position
    • Stop-loss violated at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA continues to drag but will benefit from QE4.
  • EFA remains in a downtrend and is testing the top of that range. Like EEM, a buy signal has been triggered and is back to EXTREMELY overbought.
  • Be patient for now and wait for a confirmed breakout before adding exposure.
  • With EFA back to extreme overbought, it is likely this rally will fail. We will wait for confirmation before adding risk.
  • As with EEM, we closed out of previous trading positions due to lack of performance.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position.
    • Stop-loss was violated at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • The week saw an uptick in oil prices as “speculation” returned to the markets from QE4. Commodities tend to perform well under liquidity programs due to their inherent leverage.
  • Don’t get too excited, there is not much going on with oil currently, but there is likely a tradeable opportunity approaching given the deeply oversold conditions.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold is back to a slight oversold and is holding important support, however, it is forming a bit of a downtrend from recent highs.
  • With the “QE4” back in play, the “safety trade” may be off the table for a while. We are moved our stops up and took half our position out of the portfolio previously.
  • Short-Term Positioning: Neutral
    • Last week: Hold remaining position.
    • This week: Hold position.
    • Stop-loss for whole position moved up to $137.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Like GLD, Bond prices finally cracked and have now registered a bit of an oversold condition.
  • As with GLD, we are also moving up our stop-loss to protect our gains if the “risk on” trade gets some real traction.
  • With the oversold condition in place, we will likely be able to further add to holdings as we head into the end of the year. But we aren’t there yet, so be patient for now.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $137.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • The dollar had rallied to our $99 target which we laid out back in June of this year when we started tracking the dollar.
  • Despite hopes to the contrary, the dollar remains in a strongly rising uptrend. Given a “strong dollar” erodes corporate profits on exports (which makes up 40% of corporate profits overall) a strong dollar combined with tariffs isn’t great for corporate bottom lines. Watch earnings carefully during this quarter.
  • As noted last week, the dollar is back to the bottom of its uptrend and is very oversold. We suggested a rally in the dollar was likely, which we saw a bit of bounce last week. That could well continue this week, and a tradeable opportunity is available.
  • The “buy” signal keeps us dollar bullish for now.

Major Market Buy/Sell Review: 10-21-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

This update focuses on the impact the “trade deal” announced on Friday will have on each market going forward.

S&P 500 Index

  • We are maintaining our core equity positions for now as the bullish trend remains intact. As noted in this past weekend’s newsletter, the bulls have control of the narrative for now.
  • With the “sell signal” reversed, there is a positive bias. However, without the market breaking out to new highs, it doesn’t mean much especially given the market is pushing back into an overbought condition.
  • We will wait for a confirmation breakout to add to our core equity holdings as needed.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position.
    • Stop-loss moved up to $285
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • Like the SPY, DIA broke above resistance but failed at previous highs. We are not set to test those highs once again, likely next week.
  • As with SPY, DIA has also reversed its previous “Sell signal” as well, but has failed to breakout to new highs and is back to more extreme overbought conditions.
  • We will wait for confirmation before adding more broad market exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $255.00
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • The technology heavy Nasdaq not only failed to test previous highs but failed at the previous highs from earlier this year.
  • While the “QE4” should bode well for QQQ, it continues to perform weaker than the overall S&P 500 Index.
  • The “Sell signal” is close to being reversed, but only barely so. QQQ needs to break out to new highs to confirm the bullish trend.
  • QQQ is back to very overbought short-term so remain a cautious adding exposure.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $175
  • Long-Term Positioning: Neutral

S&P 600 Index (Small-Cap)

  • One of the markets which historically perform the best under QE is small caps.
  • We suggested previously with SLY back to extreme overbought, and below previous resistance, and in a negative trend, that it looked like a better selling opportunity rather than a buy. That continues to be the advice for now until a breakout occurs.
  • We are looking to potentially add a trading position but need confirmation the recent rally isn’t just another trap.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position.
    • Stop loss previously violated.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • MDY, like SLY, is technically not in great shape, and also failed at the downtrend line and failed to hold above previous resistance.
  • MDY has now registered a short-term “buy” signal, but needs to be confirmed by a break above resistance. That has yet to occur. Be patient and take profits for now.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • EEM continues to underperform. However, QE4 will likely bleed into EEM if a performance chase begins for year-end positioning.
  • The current spurt higher also remains solidly confined to the overall downtrend.
  • The sell signal is reversing, but has failed to reverse. EEM so far. With EEM back to extreme overbought we are not convinced this rally will hold.
  • As noted previously we closed out of out trading position to the long-short portfolio due to lack of performance.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position
    • Stop-loss violated at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA continues to drag.
  • EFA remains in a downtrend and is testing the top of that range.
  • EFA has also triggered a buy signal, so a rally above the downtrend line will be needed to establish a tradeable opportunity.
  • \With EFA back to extreme overbought, it is likely this rally will fail. We will wait for confirmation before adding risk.
  • As with EEM, we closed out of previous trading positions due to lack of performance.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position.
    • Stop-loss was violated at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • The week saw an uptick in oil prices as “speculation” returned to the markets from QE4. Commodities tend to perform well under liquidity programs due to their inherent leverage.
  • Don’t get too excited, there is not much going on with oil currently, but there is likely a tradeable opportunity approaching given the deeply oversold conditions.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold is back to a slight oversold and is holding important support, however, it is forming a bit of a downtrend from recent highs.
  • With the “QE4” back in play, the “safety trade” may be off the table for a while. We are moved our stops up and took half our position out of the portfolio last week.
  • Short-Term Positioning: Neutral
    • Last week: Sold 1/2 position
    • This week: Hold remaining position.
    • Stop-loss for whole position moved up to $137.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Like GLD, Bond prices finally cracked and have reversed a good chunk of the overbought condition.
  • As with GLD, we are also moving up our stop-loss to protect our gains if the “risk on” trade gets some real traction.
  • With the overbought condition being worked off, it is likely we will be able to further add to holdings as we head into the end of the year.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $137.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • The dollar had rallied to our $99 target which we laid out back in June of this year when we started tracking the dollar.
  • Despite hopes to the contrary, the dollar remains in a strongly rising uptrend. Given a “strong dollar” erodes corporate profits on exports (which makes up 40% of corporate profits overall) a strong dollar combined with tariffs isn’t great for corporate bottom lines. Watch earnings carefully during this quarter.
  • The dollar is back to the bottom of its uptrend and is very oversold. A rally in the dollar is likely from currently levels.
  • The “buy” signal keeps us dollar bullish for now.

Major Market Buy/Sell Review: 10-14-19

Each week we produce a chart book of the major financial markets to review whether the markets, as a whole, warrant higher levels of equity risk in portfolios or not. Stocks, as a whole, tend to rise and fall with the overall market. Therefore, if we get the short-term trend of the market right, our portfolios should perform respectively.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

With this basic tutorial let’s review the major markets.

This update focuses on the impact the “trade deal” announced on Friday will have on each market going forward.

S&P 500 Index

  • We are maintaining our core equity positions for now as the bullish trend remains intact.
  • The bullish news is that the “sell signal” has been reversed. However, without the market breaking out to new highs, it doesn’t mean much especially given the market is pushing back into an overbought condition.
  • We will wait for a confirmation breakout to add to our core equity holdings as needed.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position.
    • Stop-loss moved up to $285
    • Long-Term Positioning: Neutral due to valuations

Dow Jones Industrial Average

  • Like the SPY, DIA broke above resistance but failed at previous highs. We are not set to test those highs once again, likely next week.
  • As with SPY, DIA has also reversed its previous “Sell signal” as well, but has failed to breakout to new highs and is back to more extreme overbought conditions.
  • We will wait for confirmation before adding more broad market exposure.
  • Short-Term Positioning: Neutral
    • Last Week: Hold current positions
    • This Week: Hold current positions.
    • Stop-loss moved up to $255.00
  • Long-Term Positioning: Neutral

Nasdaq Composite

  • The technology heavy Nasdaq not only failed to test previous highs but failed at the previous highs from earlier this year.
  • While the “trade deal” should bode well for QQQ, it continues to perform weaker than the overall S&P 500 Index.
  • The “Sell signal” is close to being reversed, but only barely so. QQQ needs to break out to new highs to confirm the bullish trend.
  • Short-Term Positioning: Bullish
    • Last Week: Hold position
    • This Week: Hold position
    • Stop-loss moved up to $175
  • Long-Term Positioning: Neutral

S&P 600 Index (Small-Cap)

  • The trade deal didn’t do much for small caps which are less affected by the deal and more affected by current tariffs which will remain,.
  • We suggested previously with SLY back to extreme overbought, and below previous resistance, and in a negative trend, that it looked like a better selling opportunity rather than a buy. That was good advice.
  • However, as we have repeatedly stated, there are a lot of things going wrong with small-caps currently so the risk outweighs the reward of a trade at this juncture.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position.
    • Stop loss previously violated.
  • Long-Term Positioning: Bearish

S&P 400 Index (Mid-Cap)

  • MDY, like SLY, is technically not in great shape, and also failed at the downtrend line and failed to hold above previous resistance.
  • MDY has now registered a short-term “buy” signal, but needs to be confirmed by a break above resistance. That has yet to occur. Be patient and take profits for now.
  • Short-Term Positioning: Neutral
    • Last Week: No holding
    • This Week: No holding
  • Long-Term Positioning: Bearish

Emerging Markets

  • EEM continues to underperform. Event the trade deal was unable to get EEM above resistance at the 200-dma.
  • The current spurt higher also remains solidly confined to the overall downtrend.
  • The sell signal remains and has failed to reverse. EEM needs to move above the downtrend line to become of interest again. The failure to hold above the 200-dma is not encouraging.
  • As noted previously we closed out of out trading position to the long-short portfolio due to lack of performance.
  • Short-Term Positioning: Bearish
    • Last Week: No position
    • This Week: No position
    • Stop-loss violated at $41
  • Long-Term Positioning: Neutral

International Markets

  • Like EEM, EFA continues to drag.
  • EFA remains in a downtrend and is testing the top of that range.
  • EFA has also triggered a buy signal, so a rally above the downtrend line will be needed to establish a tradeable opportunity. That has failed to occur so far.
  • As with EEM, we closed out of previous trading positions due to lack of performance.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position.
    • Stop-loss was violated at $64
  • Long-Term Positioning: Neutral

West Texas Intermediate Crude (Oil)

  • The week saw an uptick in oil prices as “speculation” returned to the markets on the completion of the “trade deal.”
  • Don’t get too excited, there is not much going on with oil currently, but there is likely a tradeable opportunity approaching given the deeply oversold conditions.
  • Short-Term Positioning: Neutral
    • Last Week: No position
    • This Week: No position
    • Stop-loss for any existing positions is $54.
  • Long-Term Positioning: Bearish

Gold

  • Gold is back to a slight oversold and is holding important support, however, it is forming a bit of a downtrend from recent highs.
  • With the “trade deal” done, the “safety trade” may be off the table for a while. We are going to move up our stops to protect profits.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
    • Stop-loss for whole position move up to $137.50
    • Long-Term Positioning: Neutral

Bonds (Inverse Of Interest Rates)

  • Like GLD, Bond prices finally cracked and have reversed a good chunk of the overbought condition.
  • As with GLD, we are also moving up our stop-loss to protect our gains if the “risk on” trade gets some real traction.
  • With the overbought condition being worked off, it is likely we will be able to further add to holdings as we head into the end of the year.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
    • Stop-loss is moved up to $137.50
    • Long-Term Positioning: Bullish

U.S. Dollar

  • The dollar had rallied to our $99 target which we laid out back in June of this year when we started tracking the dollar.
  • Despite hopes to the contrary, the dollar remains in a strongly rising uptrend. Given a “strong dollar” erodes corporate profits on exports (which makes up 40% of corporate profits overall) a strong dollar combined with tariffs isn’t great for corporate bottom lines.
  • Watch earnings carefully over the next quarter.
  • It is highly likely the dollar will continue its bullish trend with negative rates spreading all over Europe.
  • The rally has now triggered a “buy” signal which keeps us dollar bullish for now.

Portfolio Model Review: 10-07-19

On Friday, I went through the sector analysis of the market and our portfolio positioning. If you missed it, I am providing that analysis today. The regular market and sector reports will return starting tomorrow.

Feel free to email with any questions or comments.

Let’s start with the UGLY

The ugliest of sectors remains Energy (XLE). The trend remains sorely negative and even the recent spike due to the Saudi oil refinery explosions failed at the downtrend resistance line. With the economy slowing, particularly in the manufacturing sector, the pressure on oil prices, and the energy sector, remains to the downside for now. 

Current Positioning In Portfolios: No Sector Holdings, 1/4th weight XOM


Small stocks remain in a declining trend overall, however, volatility in this market has provided some decent trading opportunities for nimble investors. Small Cap stocks are the most sensitive to changes in the economic environment and don’t benefit from share repurchase activity to the degree major large cap companies do. With the small-caps trading below both their 50- and 200-dma, there is more risk to the downside currently.

There is no reason to be invested in small-caps currently as they have increased portfolio volatility and provided additional drag on performance. Buy and hold asset allocation models are not a suitable fit for late-stage bull market cycles. 

Current Positioning In Portfolios: No Holdings


Emerging markets, like small-caps, are very subject to changes in global-trade, and in this case, “trade wars” and “tariffs.” 

Also, like small-caps, emerging markets have been in a long-term downtrend and have added additional drag, and increased volatility, to traditional asset-allocation models. With the 50-dma crossed below the 200-dma, the risk to emerging markets remains to the downside currently. 

Current Positioning In Portfolios: No Holdings


 Transportation is literally the “heartbeat” of the American economy. If you eat it, consume it, wear it, watch it, or listen to it, it was transported to you by truck, train, plane or ship at some point on its way to you. The importance of this statement is that transportation tells you a lot about the economy, and currently it is suggesting things aren’t all that great. 

With transportation trading below the 50- and 200-dma, the risk is to the downside. Importantly, the 50-dma is close to crossing below the 200-dma as well. A break of lows is an important signal for the sector and the economy, so pay attention. 

Current Positioning In Portfolios: No Sector Holdings, 1/2 weight NSC


Not Really BAD, More OKAY-ish

Financial’s have been trading sideways since May and have continued to consolidate. While the chart pattern doesn’t look so bad, the risk to the sector is rising as credit risk in the sector is high. There is a tremendous amount of debt sitting on the borderline between investment grade (BBB) and junk. There is also a good amount of junk debt related to the energy sector as well, and declining oil prices is accelerating that risk. If you are long the sector, that has been “okay” for now, but watch lower support. A break of that level will signal a substantial risk increase to the overall market given the weighting of the sector to the overall market. 

Current Positioning In Portfolios: No Sector Holdings. underweight V


Like financials, the healthcare sector hasn’t really provided much lift to portfolios this year, but has added a good amount of volatility. Support continues to hold, but the sector continues to trade below the 50-dma. Healthcare tends to be a “risk off” sector, so we are maintaining some weighting as a defensive position, but are maintaining a tight stop at recent lows.

Current Positioning In Portfolios: Target Weight XLV, JNJ, HCA, UNH, ABT, CVS


Basic Materials and Industrials have been in a long sideways consolidation waiting for a resolution to the ongoing “trade war” which has plagued the sectors for the last 18 months. The good news is that both sectors continue to defend support at the 200-dma, However, there is now significant overhead resistance at recent highs which also trace back to early 2018.

As we noted in last weekend’s newsletter, we expect a trade deal to be announced, or at least the beginning process of a deal, next week. This should theoretically lift the sectors out of their slump. The risk, of course, is a disappointment which sends the sectors lower quickly, particularly if tariffs are increased further. 

Current Positioning In Portfolios: 1/2 Weight XLB & XLI, Underweight VMC, DOV, UTX, BA


Mid-Cap stocks look a whole like Industrial and Basic Materials. Like Small-caps, mid-capitalization stocks do not benefit as much from share buybacks, and are more economic sensitive. If a “trade deal” is completed, I would expect to the see the sector move higher, however, a failure, or more tariffs, will likely see a break of important support. 

Mid-cap stocks have provided no appreciable benefit to traditional asset-allocation models and have increased overall volatility. While mid-caps are holding support at the 200-dma, they are underperforming their large-cap brethren and remain below the 50-dma which has now turned lower. Some caution is advised. 

Current Positioning In Portfolios: No Holdings


The Good

Market participants have continued to chase momentum in the market. This chase continues to confine money flows into a few sectors which show relative strength and have high liquidity. Discretionary continues to be one of those sectors which remains in a very defined uptrend. The recent double top is a concern and we are watching that closely, particularly since we are seeing early warning signs coming out in falling retail sector employment and weaker core durable goods. 

It is important the sector holds its current uptrend line and climbs above the 50-dma next week. The consolidation between the lower uptrend line and the declining tops is critically important. A failure to break out of the upside of this consolidation will likely coincide with a weaker overall market.

Current Positioning In Portfolios: XLY, AAPL, MDLZ, YUM, COST


Real estate has continued to be a strong performer and remains in a strong uptrend particularly as interest rates continue to fall. The sector is very overbought, and a traditional “defensive” sector has become a “momentum” trade and is now very crowded. 

However, for now, the trend is positive and pullbacks to the 50-dma continue to provide “buyable” entry points. However, that moving average, and subsequent trendline, are now an important “sell signal” if violated. Continue to take profits on rallies to the top of the trend channel.

Current Positioning In Portfolios: XLRE, CHCT, WELL 


Staples and Utilities, like Real Estate, and Utilities, have continued to be the “safe haven” trade amidst the “sea of volatility” in other sectors of the market. However, all three of these sectors share the same traits of a very defined uptrend, extreme overbought long-term conditions, are historically extremely over-valued, and have become a very “crowded” momentum trade. 

As with Real Estate above, a violation of the lower bullish trendline, which coincides with the 50-dma is now a “hard stop” for the sector which will suggest that something in the markets have changed, and likely for the worse.

Current Positioning In Portfolios: XLP, XLU, PG, PEP, AEP, DUK


While the Technology and Communications sectors remain in positive uptrends, the performance to the S&P 500 has started to deteriorate. Both sectors are testing the lower bounds of their current uptrend, with communications remaining below the 50-dma. Technology is in a better position above the 50-dma but remains in a downtrend from the July highs. 

Given that technology is a major weight of the S&P 500, if the leadership continues to falter here, this is going to have a more important impact to the overall trend of the S&P 500. Stops for both sectors remain at their current uptrend lines.

Current Positioning In Portfolios: XLC, XLK, CMCSA, VZ, MSFT


Overall portfolio positioning remains slightly overweight cash, underweight equities with a bias to defensive positioning, and fixed income, where we have shortened duration a bit and improved credit quality.

Once we see the outcome of the “trade negotiations” next week, we will look to make other portfolio allocation adjustments accordingly.