10/18/2015 Troubling Graphs

Sector Model	XLE	3.04%
Full Model	Date	Return	Days
DRQ	5/15/2015	-16.02%	156
INT	7/7/2015	-16.79%	103
BT	8/11/2015	-7.85%	68
TM	8/12/2015	-3.91%	67
MMP	9/4/2015	-0.73%	44
CPK	9/8/2015	13.12%	40
ED	9/17/2015	5.46%	31
WEC	9/30/2015	4.26%	18
UNP	10/7/2015	-0.48%	11
ORA	10/12/2015	3.27%	6
(Since 5/31/2011)
S&P	Annualized	9.88%
Sector Model	Annualized	19.30%
Full Model	Annualized	13.00%
S&P	Total	51.14%
Sector Model	Total	116.77%
Full Model	Total	70.84%
Sector Model	Advantage	9.42%
Full Model	Advantage	3.11%
	Previous	2015
S&P	53.06%	-1.25%
Sector Model	142.84%	-10.74%
Full Model	101.13%	-15.06%

Apologies for the scarce reports lately.  A lot has been happening in the real world.

In any case, a few graphs.

Sector Model is hovering along the median regression line – annoyingly normal.

Next, the Sector Ratios, strongly in bearish territory.

I’ve mentioned the demographic problems we face. We have a lot of people retiring and a lot of aborted babies not taking their place in the workforce. The following chart is the standard deviation channels of the S&P/M1 money supply against the birthrate plus 46 years (i.e. the average age of the workforce).

The correlations are strong, which brings us to the bad news – minus another round of QE, the demographic forecasts show a sharp bear market from 2016 to 2019 – with an even steeper negative slope than the 2008 bear market.

My guess is that we’ll get more QE, but that’s ultimately up to Janet Yellen.

Tim

PS, the Sector Model is BARELY favoring XLU, and if there is a favorable gap in the morning I will take that trade.