Wednesday, February 20, 2019

Defying gravity

Mid-week market update: For the last few weeks, I have been writing about a possible market stall ahead (see Peering into 2020 and beyond). So far, the pullback has yet to materialize, though risk levels continue to rise as the SPX approaches its resistance zone at 2800-2810.



Here are some reasons why the market might be defying gravity.

The full post can be found here.




A Special Announcement
We told you so. We told you the market was going down.

Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).



We were also timely at the 2009 bottom. We issued a call to buy beaten up low-priced stocks with high insider buying a week before the ultimate bottom (see Phoenix rising? February 24, 2009).


The out-of-sample record of our model trading portfolio in 2018 was up 42.9%. For more details, see our weekly updates here.

The recent market volatility has brought a flood of new subscribers, and we are announcing a price increase, and a number of other changes in order to better control the growth of our community. However, all subscribers will be grandfathered at their old prices.

The following changes will occur as of March 1, 2019:
  • The annual subscription price will rise from US$249.99 to US$365 per year.
  • The monthly subscription price will rise from US$24.99 to US$36.50 per month.
  • The 24-hour subscription will no longer be offered.
  • The embargo period for free content will change from two weeks to four weeks.
Remember, if you subscribe now, you will be grandfathered at the old price - permanently.


Monday, February 18, 2019

China is healing

Recent top-down data out of China has been weak (see How worried should you be about China?), but there are some signs of healing as the latest round of stimulus kicks in.



The full post can be found here.



A Special Announcement
We told you so. We told you the market was going down.

Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).



We were also timely at the 2009 bottom. We issued a call to buy beaten up low-priced stocks with high insider buying a week before the ultimate bottom (see Phoenix rising? February 24, 2009).


The out-of-sample record of our model trading portfolio in 2018 was up 42.9%. For more details, see our weekly updates here.

The recent market volatility has brought a flood of new subscribers, and we are announcing a price increase, and a number of other changes in order to better control the growth of our community. However, all subscribers will be grandfathered at their old prices.

The following changes will occur as of March 1, 2019:
  • The annual subscription price will rise from US$249.99 to US$365 per year.
  • The monthly subscription price will rise from US$24.99 to US$36.50 per month.
  • The 24-hour subscription will no longer be offered.
  • The embargo period for free content will change from two weeks to four weeks.
Remember, if you subscribe now, you will be grandfathered at the old price - permanently.


Sunday, February 17, 2019

Peering into 2020 and beyond

Preface: Explaining our market timing models
We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Model is an asset allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, "Is the trend in the global economy expansion (bullish) or contraction (bearish)?"

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the those email alerts are updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.


The latest signals of each model are as follows:
  • Ultimate market timing model: Sell equities*
  • Trend Model signal: Neutral*
  • Trading model: Bullish*
* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends and tweet mid-week observations at @humblestudent. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of the those email alerts is shown here.



Gazing into the crystal ball
In the past year, I have been fortunate to be right on the major turning points in the US equity market. I was steadfastly bullish in early 2018 after the correction (see Five reasons not to worry, plus two concerns). I turned cautious in early August because of the early technical warning, which was accompanied by deterioration in top-down data (see Market top ahead? My inner investor turns cautious). Finally, I turned bullish on stocks in mid-January 2019 (see Ursus Interruptus).


What's next, as I gaze into the crystal ball for 2020 and beyond?

The full post can be found here.





A Special Announcement
We told you so. We told you the market was going down.

Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).



We were also timely at the 2009 bottom. We issued a call to buy beaten up low-priced stocks with high insider buying a week before the ultimate bottom (see Phoenix rising? February 24, 2009).


The out-of-sample record of our model trading portfolio in 2018 was up 42.9%. For more details, see our weekly updates here.

The recent market volatility has brought a flood of new subscribers, and we are announcing a price increase, and a number of other changes in order to better control the growth of our community. However, all subscribers will be grandfathered at their old prices.

The following changes will occur as of March 1, 2019:
  • The annual subscription price will rise from US$249.99 to US$365 per year.
  • The monthly subscription price will rise from US$24.99 to US$36.50 per month.
  • The 24-hour subscription will no longer be offered.
  • The embargo period for free content will change from two weeks to four weeks.
Remember, if you subscribe now, you will be grandfathered at the old price - permanently.

Wednesday, February 13, 2019

Nearing peak good news?

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

Lastly, Reuters reported that the Cleveland Fed President Loretta Mester stated the Fed is finalizing plans on scaling back or completely eliminating its program to reduce its balance sheet, otherwise known as quantitative easing:
The Federal Reserve will chart plans to stop letting its bond holdings roll off “at coming meetings,” Cleveland Fed President Loretta Mester said on Tuesday, signaling another major policy shift for the Fed after pausing interest rate hikes.

“At coming meetings, we will be finalizing our plans for ending the balance-sheet runoff and completing balance-sheet normalization,” Mester said in remarks prepared for delivery in Cincinnati. “As we have done throughout the process of normalization, we will make these plans and the rationale for them known to the public in a timely way because transparency and accountability are basic tenets of appropriate monetary policymaking.”
As a consequence, the SPX is breaking out above its 200 day moving average (dma) and approaching resistance at about the 2800 level.


I have been bullish about the likely prospect for a Sino-American trade deal (see Why there will be a US-China trade deal March 1 and The Art of the Deal meets the Art of the Possible). Should we see news of a trade deal, but that event may represent the short-term peak of good news. After all this, what other bullish developments can you think of that could propel stock prices to further highs?

The full post can be found here.




A Special Announcement
We told you so. We told you the market was going down.

Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).



We were also timely at the 2009 bottom. We issued a call to buy beaten up low-priced stocks with high insider buying a week before the ultimate bottom (see Phoenix rising? February 24, 2009).


The out-of-sample record of our model trading portfolio in 2018 was up 42.9%. For more details, see our weekly updates here.

The recent market volatility has brought a flood of new subscribers, and we are announcing a price increase, and a number of other changes in order to better control the growth of our community. However, all subscribers will be grandfathered at their old prices.

The following changes will occur as of March 1, 2019:
  • The annual subscription price will rise from US$249.99 to US$365 per year.
  • The monthly subscription price will rise from US$24.99 to US$36.50 per month.
  • The 24-hour subscription will no longer be offered.
  • The embargo period for free content will change from two weeks to four weeks.
Remember, if you subscribe now, you will be grandfathered at the old price - permanently.

Monday, February 11, 2019

The Art of the Deal meets the Art of the Possible

In his 2019 State of the Union address, President Trump said he was seeking "real structural change" to China's economy:
I have great respect for President Xi, and we are now working on a new trade deal with China. But it must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.
In the next breath, he referred to the reboot of NAFTA, which only yielded minor changes:
Another historic trade blunder was the catastrophe known as NAFTA. I have met the men and women of Michigan, Ohio, Pennsylvania, Indiana, New Hampshire, and many other states whose dreams were shattered by the signing of NAFTA. For years, politicians promised them they would renegotiate for a better deal, but no one ever tried, until now.

Our new U.S.-Mexico-Canada Agreement, the USMCA, will replace NAFTA and deliver for American workers like they haven’t had delivered to for a long time. I hope you can pass the USMCA into law so that we can bring back our manufacturing jobs in even greater numbers, expand American agriculture, protect intellectual property, and ensure that more cars are proudly stamped with our four beautiful words: “Made in the USA.
While Trump positions himself as a master dealmaker in his book The Art of the Deal, it is said that politics is the art of the possible. Let us consider what is actually possible during these rounds of US-China trade negotiations.

The full post can be found here.




A Special Announcement
We told you so. We told you the market was going down.

Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).



We were also timely at the 2009 bottom. We issued a call to buy beaten up low-priced stocks with high insider buying a week before the ultimate bottom (see Phoenix rising? February 24, 2009).


The out-of-sample record of our model trading portfolio in 2018 was up 42.9%. For more details, see our weekly updates here.

The recent market volatility has brought a flood of new subscribers, and we are announcing a price increase, and a number of other changes in order to better control the growth of our community. However, all subscribers will be grandfathered at their old prices.

The following changes will occur as of March 1, 2019:
  • The annual subscription price will rise from US$249.99 to US$365 per year.
  • The monthly subscription price will rise from US$24.99 to US$36.50 per month.
  • The 24-hour subscription will no longer be offered.
  • The embargo period for free content will change from two weeks to four weeks.
Remember, if you subscribe now, you will be grandfathered at the old price - permanently.

Sunday, February 10, 2019

Here comes the growth scare

Preface: Explaining our market timing models
We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Model is an asset allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, "Is the trend in the global economy expansion (bullish) or contraction (bearish)?"

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the those email alerts are updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.



The latest signals of each model are as follows:
  • Ultimate market timing model: Sell equities*
  • Trend Model signal: Neutral*
  • Trading model: Bullish*
* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends and tweet mid-week observations at @humblestudent. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of the those email alerts is shown here.



Bullish and bearish over different time frames
I was recently asked to clarify my market views, as they appear to have been contradictory. Let me make this clear, I am both bullish and bearish, but over different time horizons.

I expect that the U.S. equity market should perform well into the end of 2019. The recent Zweig Breadth Thrust signal on January 7 (see A Rare “What’s My Credit Card Limit” Buy Signal) has historically seen higher prices over longer time frames. Exhibitions of powerful price momentum have historically been very bullish.

Troy Bombardia recently pointed out that the NYSE McClellan Summation Index (NYSI) recently exceeded 850, and past episodes have resolved bullishly. My own shorter-term study shows that the market was higher 75% of the time after one month with an average return of 1.8%, and higher 83.3% of the time after three months with an average return of 3.9%.


However, I do have some concerns about the possibility of stock price weakness over the next few months. As we pointed out last week (see Recession Ahead? Fuggedaboutit!), the market is likely to be spooked by growth slowdown as we approach Q2. Evidence of a growth scare is already emerging.

The full post can be found here.



A Special Announcement
We told you so. We told you the market was going down.

Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).



We were also timely at the 2009 bottom. We issued a call to buy beaten up low-priced stocks with high insider buying a week before the ultimate bottom (see Phoenix rising? February 24, 2009).


The out-of-sample record of our model trading portfolio in 2018 was up 42.9%. For more details, see our weekly updates here.

The recent market volatility has brought a flood of new subscribers, and we are announcing a price increase, and a number of other changes in order to better control the growth of our community. However, all subscribers will be grandfathered at their old prices.

The following changes will occur as of March 1, 2019:
  • The annual subscription price will rise from US$249.99 to US$365 per year.
  • The monthly subscription price will rise from US$24.99 to US$36.50 per month.
  • The 24-hour subscription will no longer be offered.
  • The embargo period for free content will change from two weeks to four weeks.
Remember, if you subscribe now, you will be grandfathered at the old price - permanently.

Thursday, February 7, 2019

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

Stock prices began on a sour note this morning (Thursday) on the fears of a European growth slowdown. They slid further when Trump advisor Larry Kudlow appeared on Fox Business News and said that there's "a sizable difference" between the US and China's positions in the trade negotiations. The White House went on to pour cold water on the idea of an imminent Trump-Xi summit and said that the two may not meet before the March 1 deadline.

The two most trade deal sensitive vehicles, Chinese equity ETFs and soybean prices, weakened as a consequence. However, their technical patterns remain constructive. FXI (top panel) remains in an uptrend as it tested a resistance zone after exhibiting a double bottom. Soybean prices are also in an uptrend and they are also testing resistance.


My inclination is to shrug off the negative headlines as posturing by American negotiators. There will be a trade deal. Here is why.

The full post can be found here.




A Special Announcement
We told you so. We told you the market was going down.

Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).



We were also timely at the 2009 bottom. We issued a call to buy beaten up low-priced stocks with high insider buying a week before the ultimate bottom (see Phoenix rising? February 24, 2009).


The out-of-sample record of our model trading portfolio in 2018 was up 42.9%. For more details, see our weekly updates here.

The recent market volatility has brought a flood of new subscribers, and we are announcing a price increase, and a number of other changes in order to better control the growth of our community. However, all subscribers will be grandfathered at their old prices.

The following changes will occur as of March 1, 2019:
  • The annual subscription price will rise from US$249.99 to US$365 per year.
  • The monthly subscription price will rise from US$24.99 to US$36.50 per month.
  • The 24-hour subscription will no longer be offered.
  • The embargo period for free content will change from two weeks to four weeks.
Remember, if you subscribe now, you will be grandfathered at the old price - permanently.


Wednesday, February 6, 2019

What gold tells us about stock prices

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




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

The full post can be found here.



A Special Announcement
We told you so. We told you the market was going down.

Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).



We were also timely at the 2009 bottom. We issued a call to buy beaten up low-priced stocks with high insider buying a week before the ultimate bottom (see Phoenix rising? February 24, 2009).


The out-of-sample record of our model trading portfolio in 2018 was up 42.9%. For more details, see our weekly updates here.

The recent market volatility has brought a flood of new subscribers, and we are announcing a price increase, and a number of other changes in order to better control the growth of our community. However, all subscribers will be grandfathered at their old prices.

The following changes will occur as of March 1, 2019:
  • The annual subscription price will rise from US$249.99 to US$365 per year.
  • The monthly subscription price will rise from US$24.99 to US$36.50 per month.
  • The 24-hour subscription will no longer be offered.
  • The embargo period for free content will change from two weeks to four weeks.
Remember, if you subscribe now, you will be grandfathered at the old price - permanently.


Monday, February 4, 2019

Demographics isn't destiny = History only rhymes

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


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


I then postulated that rising savings from Millennial should usher in another golden age in US equities.

This is the part where history doesn't repeat itself, but rhymes.

The full post can be found here.




A Special Announcement
We told you so. We told you the market was going down.

Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).



We were also timely at the 2009 bottom. We issued a call to buy beaten up low-priced stocks with high insider buying a week before the ultimate bottom (see Phoenix rising? February 24, 2009).


The out-of-sample record of our model trading portfolio in 2018 was up 42.9%. For more details, see our weekly updates here.

The recent market volatility has brought a flood of new subscribers, and we are announcing a price increase, and a number of other changes in order to better control the growth of our community. However, all subscribers will be grandfathered at their old prices.

The following changes will occur as of March 1, 2019:
  • The annual subscription price will rise from US$249.99 to US$365 per year.
  • The monthly subscription price will rise from US$24.99 to US$36.50 per month.
  • The 24-hour subscription will no longer be offered.
  • The embargo period for free content will change from two weeks to four weeks.
Remember, if you subscribe now, you will be grandfathered at the old price - permanently.

Sunday, February 3, 2019

Recession ahead? Fuggedaboutit!

Preface: Explaining our market timing models
We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Model is an asset allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, "Is the trend in the global economy expansion (bullish) or contraction (bearish)?"

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the those email alerts are updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.



The latest signals of each model are as follows:
  • Ultimate market timing model: Sell equities*
  • Trend Model signal: Neutral*
  • Trading model: Bullish*
* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends and tweet mid-week observations at @humblestudent. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of the those email alerts is shown here.



Confident about a slowdown?
Recently, a number of prominent investors and analysts, including Jeff Gundlach, David Rosenberg, and Ed Yardeni, have warned about an ominous recession signal from the Conference Board's consumer confidence survey. Ed Yardeni's analysis of the present situation to expectations spread was especially ominous for equity investors.

Fuggedaboutit! The American economy isn't going into recession. Call me bullish, but with a caveat.

The full post can be found here.