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Improvement Across the Board

160729MarketHealth

Just a quick note this week. All of my core market health indicators improved this week, but we’re still waiting on measures of market quality and strength to move above zero before adding more exposure to the core portfolios. Have a good weekend everyone!

 
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More Improvement

160722MarketHealth

Over the past week my core market health indicators bounced around, but didn’t see significant improvement. However, I’m seeing other signs that the market can burst higher. First a weekly chart of the S&P 500 Index (SPX) has a clear break out of a bull flag with a successful retest (after a fake out). MACD confirmed the retest by not showing a bearish crossover. RSI on the weekly chart is also well above bear market levels. Next we have the Nasdaq 100 (NDX) compared against SPX. This ratio is breaking above its 20 week moving average. This condition usually results in a market that moves higher. Technology has been lagging since December 2015, but it appears that it is starting to lead again. If this condition persists it should fuel a good sized move higher in the general market. The only fly in the ointment is Dow Theory. The transports (DJTA) still haven’t broken above their last secondary high. If DJTA can get above 8110 it will signal that we’re

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Slow Improvement

160715MarketHealth

Over the past week all of my core market health indicators improved. None of them improved enough to change any portfolio allocations. One thing that is still concerning is that technology isn’t participating strongly in this rally. I’d like to see the ratio between NDX and SPX break above its 20 week moving average as a sign the rally has legs. Some consolidation here then a resumption of the rally that is led by financials and technology would be a very healthy sign of a big run ahead.

 
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Leadership Waning

160708BPSPX

Over the past couple of months, I’ve highlighted some encouraging signs that had accompanied price strength in the market. Unfortunately, most of those signs of strength haven’t persisted as the market is moving close to all time highs. First lets look at the Bullish Percent Index (BPSPX). It finally got above the 2015 highs in March and April of this year, but the subsequent consolidation in the market did serious damage to this indicator. It is still below 60% which is a big drag on the market (and adds the risk of a big decline). Basically, a lot of point and figure charts turned bearish during the last consolidation and haven’t righted themselves. Next is small caps stocks compared to big caps. They have lagged during the last rally. I like to see them lead as a sign of investors taking risk in their portfolios. Money flowed into mega cap stocks faster than big cap stocks during the last rally too. Another poor sign for a sustained rally. It looks

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That Was Quick

160701MarketHealth

Last week we got a market risk warning due to the surprise of the Brexit vote. This week, that warning has been cleared as market participants realize it will take a couple of years to sort out… so they can wait until then to panic. 😉 My core market health indicators, with the exception of trend, improved last week. The overall numbers are still soft, but positive enough to change the portfolio allocations to the following. Volatility Hedged portfolio: 100% long Long / Short Hedged portfolio: 80% long high beta stocks and 20% short the S&P 500 Index (or the ETF SH) Long / Cash portfolio: 60% long and 40% cash One thing of note that happened over the past few weeks is the Dow Jones Transportation Average (DJTA) created a new secondary high near 8110. The Dow Jones Industrial Average (DJIA) also created a new secondary high near 18100. DJIA is above November 2015 secondary high, but DJTA is below all of its recent secondary highs. As a result,

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