Below are charts with the bullish intensity scores for the most bullish stocks on StockTwits for the week and month ending 1/14/14.
The consolidation warning issued for Procter & Gamble (PG) on 12/17/13 has ended. Note that this signal doesn’t have an associated positive divergence from smoothed sentiment. That suggests that the consolidation may not quite be over. However, when consolidation warnings end the stocks generally resume their primary trend so PG could turn up in the next week or so.
Over the past week our core indicators continued to confirm the market’s rally. At the same time the early warning signs I’ve been tracking have all been cleared. The NYSE Advance/Decline line (NYAD) has moved to new highs with the market, the ratio between the S&P 500 Equal Weight index (SPXEW) and the S&P 500 Index (SPX) has moved back above its 20 week moving average, the ratio between near term volatility (VIX) and three month volatility (VXV) has moved back below .9, and last but not least our market risk indicator has moved well away from a warning. For those of you who are interested here is a post that outlines a simple hedge strategy that uses our market risk indicator as a signal. The conditions are in place for the market to move higher. It just needs a reason. The only thing I see of concern is that a few of the internal indicators I watch are getting into overbought territory. But overbought conditions can last a long
Over the past week our market health indicators held up while the perception of risk subsided. Our measures of market strength fell the most, but are still showing very healthy readings. With little concern for risk and strong underlying internals the market is free to move higher. All it needs is a reason. One of the things I’ve been mentioning over the past few months is the move to larger stocks (perceived as safe). That condition often precedes market declines. Comparing the S&P 500 Equal Weight index (SPXEW) to the S&P 500 index (SPX) highlights the move. When the ratio between SPXEW and SPX falls below its 20 week moving average it often marks short term tops. It was something I’ve been watching as an early warning sign, but that condition has now been cleared. It’s an example of how resilient the market currently is. Below is a chart that represents our core health indicator categories. With all of them above zero our portfolios remain 100% long.
The StockTwits Top 10 Portfolio has started the year with strong returns. Over the past week it is up 2.34% while the S&P 500 index (SPX) is essentially flat. The majority of the gains are due to Yelp (YELP), Solar City (SCTY), and Green Mountain Coffee (GMCR). The drags on the portfolio are Walter Energy (WLT) and Groupon (GRPN). It is beating the Twitter Top 10 portfolio which is performing closer to the market over the week. 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 1/3/2014 $SCTY 168 59.27 9957.36 66.01 11089.68 11.37% $BAC 620 16.41 10174.20 16.68 10341.60 1.65% $YHOO 249 40.12 9989.88 41.15 10246.35 2.57% $BIDU 57 175.28 9990.96 178.25 10160.25 1.69% $GRPN 828 12.08 10002.24 11.5 9522.00 -4.80% $MA 12 830.31 9963.72 835.9 10030.80 0.67% $WLT 626 15.98 10003.48 13.84 8663.84 -13.39% $CELG 58 169.81 9848.98 166.19 9639.02 -2.13% $YELP 148 67.66 10013.68 80.69 11942.12 19.26% $GMCR 132
The Twitter Top 10 portfolio is flat to start the year. It is performing essentially the same as the S&P 500 index (SPX). It is up .18% from the first Friday of the year. The drags on the portfolio are Himax Technologies (HIMX), Kandi Technologies (KNDI), and Groupon (GRPN). Solar City (SCTY) and Baidu (BIDU) account for the majority of the gains. Below is a performance chart and the details for the current holdings. Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss 1/3/2014 $HIMX 925 14.63 13532.75 13.64 12617.00 -6.77% $MA 16 830.81 13292.96 835.71 13371.36 0.59% $DDD 140 96.42 13498.80 94.07 13169.80 -2.44% $BIDU 77 168.71 12990.67 178.00 13706.00 5.51% $YHOO 335 40.12 13440.20 41.19 13798.65 2.67% $SCTY 228 59.27 13513.56 66.06 15061.68 11.46% $CELG 79 169.81 13414.99 166.57 13159.03 -1.91% $LVS 172 78.35 13476.20 80.16 13787.52 2.31% $GRPN 1120 12.08 13529.60 11.50 12880.00 -4.80% $KNDI 1018 13.29 13529.22 12.68 12908.24 -4.59% Cash 437.08 437.08 Totals 134656.03 134896.36 0.18%
I got a few questions about the volatility hedge strategy that I mentioned yesterday that provoked a few thoughts I thought might interest you. The first thought is that there is no need to go all the way to 50% hedged with XVZ (and 50% long) when our market risk indicator signals. I personally use a large hedge when it signals because the indicator is designed to warn of an acceleration to the downside. As a result, I’m willing to give up some upside gains on whip saws for the chance of making money if the market falls rapidly…and volatility rises. However, I recognize that you may have different goals than mine so here’s a performance chart that shows varying sizes of the hedge. Notice that a hedge below 20% (80% long and 20% XVZ) would have resulted in the portfolio continuing to fall with the market during the 2008 financial crisis. However, during a large swift draw down a 20% hedge with volatility was enough to protect the portfolio
Here’s an update of a post I did back in May where we showed how a volatility ETF (XVZ) can be used as an easy way to hedge when market risk is high. I use our Market Risk Indicator to signal that there is a high risk that the market is going to accelerate to the downside and an appropriate time to hedge. This creates a simple hedge strategy for long term investors. The nice thing about this hedge is that our risk indicator doesn’t signal often so changes to the portfolio are few and far between. For example, from July of 2004 (as far as my XVZ data goes back) until July of 2007 there were no signals. When perceptions of risk get high our market risk indicator tends to signal more. From July of 2007 until September of 2008 there were several signals as the housing and banking crisis was coming to the attention of investors. During 2013 the indicator didn’t signal which made for easy investment and
The counter trend bounce signal issued for eBay (EBAY) on 12/16/13 has ended. Please note: This signal should have closed yesterday. However, I was traveling and didn’t see the signal until today. For official tracking purposes today’s date and price were used because I don’t want to backdate any signals.
Below are charts with the bullish intensity scores for the most bullish stocks on Twitter for the week and month ended 1/7/14.