This week we saw more of the same. Our core indicators strengthened while ancillary indicators weakened. The only core indicator that got worse was our measures of risk. Early in the week they were showing more concern from market participants even as the market moved higher. Thursday did some serious damage to them and Friday only saw a partial recovery. So far they’re providing early warning, but no signals. It will most likely take another few weeks to shake out. One thing I follow that suffered a lot of damage this week is the relationship between high quality bonds (LQD) and junk bonds (JNK). While LQD appears to be painting a bullish flag, JNK is falling sharply. This suggests that bond owners are shifting money from risk (JNK) to safety (LQD). The events in Ukraine and Gaza on Thursday had LQD rising while JNK fell. Watch this relationship going forward because a shift in bonds often occurs before a flight to safety in stocks. Speaking of stocks, the symbols I
Over the past week market health rose, but every measure of perceptions of risk rose too. It speaks to the current theme in the market where core indicators are rising and ancillary indicators are falling. While the underlying health of the market wasn’t affected by this week’s volatility it did do some damage to market participant confidence in the market. Our core measure of risk along with our Market Risk Indicator have slowly been moving closer to warning. At the moment they have plenty of room above the positive line so they aren’t overly concerning, but something to keep an eye on in the next few weeks. Below is a chart with our core health categories.
So far this month the Twitter Top 10 portfolio has given back gains from May and June. Momentum stocks are having trouble holding up after large runs. Twitter (TWTR) is the largest drag on the portfolio down 12%. Its chart is symbolic of many momentum stocks that suffered large corrections early in the year and then rallied. Now many of them are giving back a portion of recent gains. The action of these stocks should be a good tell for the market going forward. Below is a performance chart and details of the current holdings. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 7/3/2014 $AAPL 120 94.03 11283.60 94.02 11282.40 -0.01% $TWTR 279 41.33 11531.07 36.37 10147.23 -12.00% $FB 174 66.29 11534.46 67.67 11774.58 2.08% $TSLA 50 229.25 11462.50 218.10 10905.00 -4.86% $BBRY 1087 10.61 11533.07 10.03 10902.61 -5.47% $GOOG 20 584.73 11694.60 588.42 11768.40 0.63% $SCTY 161 71.34 11485.74 66.09 10640.49 -7.36% $DDD 187 61.62 11522.94 57.21 10698.27 -7.16% $PLUG
So far this month the StockTwits Top 10 portfolio is suffering across the board losses with every stock falling. Six stocks have losses greater than 7%. The behavior of the stocks in the portfolio is similar to the March picks and suggests that the general market may experience some choppiness if the trend continues. Below is a performance chart and details of the current holdings. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 7/3/2014 $TWTR 254 41.33 10497.82 36.52 9276.08 -11.64% $SCTY 147 71.34 10486.98 65.89 9685.83 -7.64% $DDD 170 61.62 10475.40 57.21 9725.70 -7.16% $MU 355 33.73 11974.15 33.21 11789.55 -1.54% $AMD 2586 4.24 10964.64 3.77 9749.22 -11.08% $GMCR 83 125.24 10394.92 120.52 10003.16 -3.77% $SPWR 296 39.90 11810.40 38.52 11401.92 -3.46% $FSLR 151 69.50 10494.50 62.51 9439.01 -10.06% $BIDU 55 191.20 10516.00 190.77 10492.35 -0.22% $LNKD 60 173.71 10422.60 159.56 9573.60 -8.15% Cash 322.55 322.55 Totals 108359.96 101458.97 -6.37%
Over the weekend I mentioned that our core indicators were positive but other indicators were falling. As the week progresses and the market climbs I’m seeing more of the same. Our core indicators are showing more strength and the things I saw showing weakness are mostly getting weaker. Our core measure of risk is diverging from price after falling from overbought territory. It isn’t recovering even as the market moves higher. This is a pattern that I’ve seen many times before that often precede corrections of 10%. It is a signal of some underlying weakness in the market structure and change of perception by investors. Next the ratio between the S&P 500 Equal Weight Index (SPXEW) and the S&P 500 Index is falling sharply after breaking below its 20 week moving average. More rotation to large caps (which often means safety). Today was a good up day in the market, but the momentum stocks didn’t participate. This is the most concerning thing on my radar at the moment. If these
At the close today (7/15/14) a consolidation warning was issued for Microsoft (MSFT) from Twitter sentiment. Please note: this isn’t a sell signal simply warning that support from traders on Twitter is falling.
Last week’s market action didn’t affect our core health indicators too much, but many of the ancillary indicators I watch suffered some damage. While the market looks healthy on the surface there are enough indicators warning to suggest the worst isn’t behind us yet. Currently we have a tale of two markets. Although our core health indicators are positive most of them have weak enough readings that they could turn negative over the next few weeks. However, this would be very unusual given the fact that many of them turned positive just last week. Generally, when all of them move above zero they stay there for at least two months. Weakness in these indicators will provide significant warning. Another indicator that is telling two stories is our core measure of risk. It is still showing low perceptions of risk, but just came out of an overbought condition. This often marks the beginning of corrections larger than 10%. Momentum stocks are also acting indecisive. Many of them have had good runs over
Over the past week our market health indicators bounced around a bit, but remained positive. As a result, we’re still long in all of the core portfolios. The largest indicator change came from our core measure of risk. This indicator came out of overbought readings this week which has often marked the beginning of declines of 10% or more in the market. When this occurred in 2013 the market had small dips, but nothing significant…so it was an exception to the rule. The message from this indicator is to watch the market carefully over the next several weeks. If it fails to move on to new highs it will provide warning that a larger correction is likely underway. Below is a chart of our core health categories.
The Twitter Top 10 portfolio fell with the market this week. Many of the momentum names fell, but Apple (AAPL), Facebook (FB), and BlackBerry (BBRY) held up. There are still a lot of good looking charts so it’ll take another week or two before we’ll know if this was simply some profit taking or the beginning of something more serious. Below is a performance chart and details of the current holdings. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 7/3/2014 $AAPL 120 94.03 11283.60 95.08 11409.60 1.12% $TWTR 279 41.33 11531.07 38.54 10752.66 -6.75% $FB 174 66.29 11534.46 66.48 11567.52 0.29% $TSLA 50 229.25 11462.50 218.53 10926.50 -4.68% $BBRY 1087 10.61 11533.07 11.41 12402.67 7.54% $GOOG 20 584.73 11694.60 578.27 11565.40 -1.10% $SCTY 161 71.34 11485.74 66.56 10716.16 -6.70% $DDD 187 61.62 11522.94 57.24 10703.88 -7.11% $PLUG 2551 4.52 11530.52 4.24 10816.24 -6.19% $GMCR 90 125.24 11271.60 122.04 10983.60 -2.56% Cash 136.03 136.03 Totals 114986.13 111980.26 -2.61%
Over the past week the StockTwits Top 10 portfolio fell sharply. The drop was a result of heavy selling in momentum stocks. It looks like traders are very quick to take profits. This should be taken as warning that market participants are still reeling from large losses in momentum names during the early months of the year. On the bright side, many of the stocks in the portfolio this month look like they’re simply consolidating after very strong runs or breaking out to new highs. Many of the charts still have very constructive patterns. Below is a performance chart and details of the current holdings. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 7/3/2014 $TWTR 254 41.33 10497.82 38.46 9768.84 -6.94% $SCTY 147 71.34 10486.98 66.34 9751.98 -7.01% $DDD 170 61.62 10475.40 57.1 9707.00 -7.34% $MU 355 33.73 11974.15 32.77 11633.35 -2.85% $AMD 2586 4.24 10964.64 4.37 11300.82 3.07% $GMCR 83 125.24 10394.92 121.35 10072.05 -3.11% $SPWR 296 39.90 11810.40 38.44