2/2/2014 The "eh" market

Style Model	Mid Blend
Sector Model	XLU	3.77%
Large Portfolio	Date	Return	Days
ABX	4/11/2013	-19.90%	297
NEM	9/30/2013	-22.16%	125
EW	10/28/2013	-15.49%	97
JOY	11/18/2013	-6.75%	76
OXY	11/27/2013	-9.68%	67
MUR	12/23/2013	-10.98%	41
SWM	12/31/2013	-9.05%	33
NKE	1/7/2014	-5.92%	26
BTI	1/15/2014	-4.54%	18
MGEE	1/30/2014	1.53%	3
(Since 5/31/2011)
S&P	Annualized	11.09%
Sector Model	Annualized	23.70%
Large Portfolio	Annualized	26.02%

Rotation: selling MGEE; buying TM.

Yes, yes – too short a fling with MGEE, but it was fun while it lasted…

Right now an “ideal” hold on the model would be:

NEM	GOLDSILV
JOY	COAL
ABX	GOLDSILV
TM	AUTO
HMC	AUTO
TTM	AUTO
AEM	GOLDSILV
ED	UTILEAST
PPL	UTILEAST
FE	UTILEAST

Meanwhile the position of the sector and style grid has been steadily moving further along a bearish trajectory:

Last weekend the position was in Small Value Utilities, then midweek is was Large Growth Utilities, and today it is in Mid Blend Utilities.

This is a classical shifting of assets into progressively more defensive positions.

Consumer Staples, Healthcare, and Utilities are defensive.

Value vs. Growth is Defensive.

Large cap vs. Small cap is Defensive.

Maximum defensiveness would be in the lower right hand quadrant, and a new rally would be marked by a move into the upper left hand quadrant: Cyclicals.

AUTO – where our Toyota Motors call would fall, is a Cyclical industry.

The question is, “how”?

How could we be deep into bearishness with a call for an Auto company to show up on the model?  Where would such recovery come from in light of the taper?

The key, I think, is in the fact that Coal and GoldSilv are also holding strong on the model.

It seems to me that the money-flow is showing us that the taper is STILL easing.  That is, we haven’t stopped printing money.  We just started printing it a bit slower.

In any case, the sector and style chart is cylindrical in both dimensions: If you drop off the bottom you’ll find yourself at the top; or if you move beyond the right you’ll re-enter from the left.  “Below” finance is Cyclicals.  To the “right” of Large Value is Small Growth.

That’s why markets suddenly reverse when all hope seems to be lost.  When it cannot possibly get any worse, it doesn’t.

Right now we’re right in the middle of the lower right hand quadrant.  Quite a boring ambiguous time.

If we were in Large Value Finance I’d get excited.  In Mid Blend Utilities it’s just… eh…

However, I would like to point out that “eh” ain’t so bad.  Take a look at the year to date performance of my “eh” Sector selection versus the far more exciting S&P:

I’ll take “eh” right now.

Tim