Sunday, March 27, 2022

3/27/2022 Mixed Signals

3/27/2022 Update

Mixed Signals

 


The first thing to notice is that the sector ratios are extremely bullish.  The current call on the sector model is Consumer Cyclicals, with Financials as a possible replacement in the near future.  These are most typical of a market bottom instead of a top.  At the very least they show a rally to be likely over the next two months.

The rotation in Industries has been quite vigorous as well.  But the results are mixed.  Of the best Industries a third are neutral, a third bullish, and a third bearish.  The full model will be rotating into a more defensive sector on Monday while the sector model is screaming optimism.

And, although we won’t be buying into the Cannabis Industry this week, the fact that it’s in the buy zone is a strong metaphor for what I’m seeing in the models.

So, we are optimistically buying pessimistic stocks.

Wars, rumors of wars, and inflation will do that.

Speaking of inflation, the spike in interest rates has created a scare in the bond market.  In our opinion, bonds should be bought to hold to term, rather than traded in interest rate speculation.  Buy and hold a bond for what it is, rather than what it might be.

That said, the current environment of predicted hikes in the interest rate project that now is not a good time to buy bonds.  The idea is that if interest rates are going up then bond values will go down.  For traders and speculators, that’s bad.

What about for holders?  The current rate on the ten year is 2.48%.  The dividend rate on SPY is half of that, leaving us with two questions:

1)      Is inflation going to be less than 2.48% over the next ten years?

2)      Is SPY going to have an annual return less than 2.48% in combined growth and dividends over the next ten years?

It’s understandable that at a certain age one wants to avoid risk. Stocks always carry short term risk and currently bonds are almost a guaranteed long-term loss.

The present bullishness in stock sectors isn’t necessarily from a structural strength in global stability during a crisis in Eastern Europe.  Rather, it simply could be from the fact that the other options are worse during high inflation and rising interest rates.

Hence the mixed signals on the model.

The model doesn’t time.  It rotates between sectors and industries to find the most promising stocks even in scary times.  We want to go up more than the average stock in good times, and go down less than the average stock in bad times.

The current positions in the small model remain unchanged:

·         EA

·         JNJ

·         ZBRA

·         TTEK

·         DDAIF

 

 



Friday, April 12, 2019

4/12/2019 Going Dark

In a few weeks I'll be moving my posts to a new location.

I'll post details about the new location and format when it is available.  In the meantime, I will no longer post any trades on this site.

The Full Model is steady enough to stand on its own for a few weeks, but the new site will likely not include the Sector Model, and the XLV trade posted will grow stale without notice.

The next post will give information about the new site and features.

Until then, stay sane out there!

Tim

Saturday, March 23, 2019

3/23/2019 About that Yield Curve


Sector Model
XLE | XLU
-1.38%
Full Model
Date
Return
Days
BT
8/11/2015
-49.75%
1320
TMK
11/23/2015
36.53%
1216
NVR
12/16/2015
67.66%
1193
NVR
2/22/2016
74.72%
1125
AMWD
3/17/2016
11.16%
1101
CASY
5/12/2016
11.14%
1045
MFC
9/1/2016
36.73%
933
SFM
9/8/2016
14.89%
926
CFFN
9/12/2016
4.81%
922
FOSL
5/11/2017
-3.88%
681
HIBB
7/25/2017
65.65%
606
FOSL
7/27/2017
25.72%
604
HZO
8/1/2017
21.68%
599
BCE
5/31/2018
13.63%
296
DFS
10/21/2018
-4.26%
153
CL
10/29/2018
10.39%
145
ATVI
11/23/2018
-7.94%
120
KMI
12/31/2018
27.36%
82
ALLE
2/20/2019
-0.85%
31
AMAT
3/5/2019
4.70%
18
(Since 5/31/2011)
S&P
Annualized
9.80%
Sector Model
Annualized
13.99%
Full Model
Annualized
12.32%
S&P
Total
107.59%
Sector Model
Total
178.03%
Full Model
Total
147.86%
Sector Model
Advantage
4.18%
Full Model
Advantage
2.52%
Previous
2019
S&P
85.79%
11.74%
Sector Model
129.27%
18.44%
Full Model
122.54%
11.38%



So, after 11 years of waiting, we finally got an inverted yield curve.

Bear market?

Well, not quite.  An inverted yield curve usually PRECEDES a bear market, but sometimes by a couple of years.

I’ve been having computer troubles of late, and now have a backup computer – which I’m restoring data to.  I had limited internet access the other day and couldn’t report the switch to XLE and XLU.

To make matters worse I wasn’t able to get into the XLU position and doubled down in XLE.  So while the model is reporting XLE and XLU the returns posted reflect that I’m in XLE.

I’m still planning to drop reporting on the Sector Model at some point, not that the Full Model is functioning on par with it.

As for the broad market, the Fed has blinked, but they haven’t panicked yet.  They were slightly late to panic in 2001, and a little early in 2008, but there’s no point in panicking until they do, and barely a point to panic even then. 

Tim








Wednesday, March 6, 2019

Sunday, March 3, 2019

3/3/2019 Possible Trade This Week


Sector Model
XLV
1.42%
Full Model
Date
Return
Days
BT
8/11/2015
-49.96%
1300
TMK
11/23/2015
41.00%
1196
NVR
12/16/2015
61.57%
1173
CMP
2/19/2016
-11.27%
1108
NVR
2/22/2016
68.38%
1105
AMWD
3/17/2016
25.28%
1081
CASY
5/12/2016
21.07%
1025
MFC
9/1/2016
37.90%
913
SFM
9/8/2016
19.31%
906
CFFN
9/12/2016
12.48%
902
FOSL
5/11/2017
10.46%
661
HIBB
7/25/2017
35.57%
586
FOSL
7/27/2017
44.47%
584
HZO
8/1/2017
27.74%
579
BCE
5/31/2018
11.82%
276
DFS
10/21/2018
-2.75%
133
CL
10/29/2018
11.90%
125
ATVI
11/23/2018
-18.48%
100
KMI
12/31/2018
23.65%
62
ALLE
2/20/2019
1.67%
11
(Since 5/31/2011)
S&P
Annualized
9.87%
Sector Model
Annualized
13.45%
Full Model
Annualized
12.54%
S&P
Total
107.51%
Sector Model
Total
166.14%
Full Model
Total
149.94%
Sector Model
Advantage
3.58%
Full Model
Advantage
2.67%
Previous
2019
S&P
85.79%
11.69%
Sector Model
129.27%
20.29%
Full Model
122.54%
12.31%





The 2019 numbers might be slightly off.  I had a computer crash and I’m restoring my files.

There is a potential to trade CMP for AMAT this week.  Waiting for the setup to complete.



Tim