The last time we have seen a movement in our indicators such as the movement in the last three months were the following dates: 1971, 1978, 1986, 1994, and 2006. The only year that a recession did not occur a year or two later was 1994. A recession occurred in the other four periods on average 1 and half years later. We predict a global recession within the next year.
However, our behavioral indicators suggest that before that global recession occurs global markets increase. Therefore we are bullish to an extent over the following year afterwards we are bearish.
The following markets we like:
1. South Africa
2. Turkey
3. US government bonds
4. Gold
5. India
6. Mexico
Our indicators suggest several emerging equity markets will do over the upcoming year. Right not emerging markets have not performed well but we think these markets will do well in the upcoming year.
Sunday, November 13, 2011
Sunday, October 23, 2011
Market Update 10.23.11
The model results suggest no imminent 2008 type global crisis. The short-term measures have come down considerably. The crisis indicators for Europe and specific European countries of Greece, Spain, and Italy are near the crisis threshold but still below. Typically when a crisis is going to hit our indicators pass the threshold months in advance. Since the markets have already been rattled we believe the current measures near crisis threshold are more contemporaneous. When this occurs it typically means the end is near, however, the market is susceptible to another major shock 3-12 months out.
What to invest in today?
The top five markets we like are:
South Africa
Turkey
India
Mexico
Japan
What to invest in today?
The top five markets we like are:
South Africa
Turkey
India
Mexico
Japan
Sunday, October 16, 2011
Market Update 10.16.11
Two weeks ago we posted that the global markets were near a bottom based on our measures. Since then they have rebounded considerably. We are not out of the woods yet though. US Treasuries and Gold are still very much bullish according to the model. Even so, they are losing some bullish strength. Once the model suggest no more bullishness then we are out of the woods for the time being.
However, select equity market are now becoming bullish which is a good sign. Prior to July 31 there were no equity markets that were bullish. Here are the top equity markets:
South Africa
Mexico
India
Japan
China
For those that are risk takers, we view Indonesia and Malaysia are coming back hard. When markets are at the bottom of our list we find they typically come back strong. These markets are at the bottom of our list now.
However, select equity market are now becoming bullish which is a good sign. Prior to July 31 there were no equity markets that were bullish. Here are the top equity markets:
South Africa
Mexico
India
Japan
China
For those that are risk takers, we view Indonesia and Malaysia are coming back hard. When markets are at the bottom of our list we find they typically come back strong. These markets are at the bottom of our list now.
Sunday, October 2, 2011
Market Update 10.02.11
Financial markets have been crazy the past two months. It does not look like it will subside until the European debt crisis and more info about the US economy becomes available.
Either way what does the model say? The model is not predicting another global financial crisis such as in 2008. Ignore the fear that is out there. We find irrational fear is at one of its greatest points in our history since 1970. This means the bottom is close. Also our US measure is close to its financial crisis threshold. When the market moves down 10-20% and then hits the financial crisis threshold it also means the market has bottomed. It is not at the threshold yet but the most we see the market fall is between 5-10%. Not another 2008.
Where do you place your money?
We like select equity markets such as Japan, Mexico, South Africa, Turkey, and India. Treasuries are still bullish.
Either way what does the model say? The model is not predicting another global financial crisis such as in 2008. Ignore the fear that is out there. We find irrational fear is at one of its greatest points in our history since 1970. This means the bottom is close. Also our US measure is close to its financial crisis threshold. When the market moves down 10-20% and then hits the financial crisis threshold it also means the market has bottomed. It is not at the threshold yet but the most we see the market fall is between 5-10%. Not another 2008.
Where do you place your money?
We like select equity markets such as Japan, Mexico, South Africa, Turkey, and India. Treasuries are still bullish.
Sunday, September 11, 2011
9.11.11 Market Update
Based on recent model results we do not see stock markets falling that much further. Looks like the markets will battle back and forth until uncertainty settles. The US and Europe are still well under their financial crisis thresholds. If this was a financial crisis brewing our indicators would have already indicated a financial crisis.
Our model still favors gold and treasuries of course. As far as equity markets our model still likes Asian markets such as the Asian Tigers as well as China and India. Of course we are concerned about what the markets will bring us. However, our models suggest the worst is behind us. Markets are overreacting to a point. At the same time there are no bullish signals for any one particular market other than gold and treasuries which suggests the markets will not increase in the immediate future, but the markets will not fall another 10 or 15% again.
Our model still favors gold and treasuries of course. As far as equity markets our model still likes Asian markets such as the Asian Tigers as well as China and India. Of course we are concerned about what the markets will bring us. However, our models suggest the worst is behind us. Markets are overreacting to a point. At the same time there are no bullish signals for any one particular market other than gold and treasuries which suggests the markets will not increase in the immediate future, but the markets will not fall another 10 or 15% again.
Sunday, September 4, 2011
Blog 9.04.11
The media has been taking about a double dip recession. What do our indicators say? It says there is no US recession. Going back to 1970 our indicators have indicate there was a US recession before every US recession. What does this mean? It means the markets are forecasting a worst case scenario.
Our model suggests to keep a good exposure to gold, however, also to emerging Asian markets such as Indonesia, Thailand, and Malaysia.
Our model suggests to keep a good exposure to gold, however, also to emerging Asian markets such as Indonesia, Thailand, and Malaysia.
Sunday, August 14, 2011
Market Update 8.14.11
Last week we suggested the market would flat to slightly positive based on some of our indicators. A pretty bold move given the great uncertainty. The market was slightly down. We believe the US market is near a bottom and it will recover until the middle of September. By then it will fall late September and early October and increase until the rest of the year. At that point we will have to evaluate. However, the outlook is not great.
Even so our indicators do like the Asian tigers such as Indonesia and Thailand.
The model likes gold as well. However, we sold because of the large run up. We will look to buy later on. In addition, commodity markets are becoming slightly more bullish such as Brazil and South Africa. With the Fed keeping interest rates low this could mean more gains for commodities. We are waiting to receive a confirmation of this trade before acting on it.
Even so our indicators do like the Asian tigers such as Indonesia and Thailand.
The model likes gold as well. However, we sold because of the large run up. We will look to buy later on. In addition, commodity markets are becoming slightly more bullish such as Brazil and South Africa. With the Fed keeping interest rates low this could mean more gains for commodities. We are waiting to receive a confirmation of this trade before acting on it.
Saturday, August 6, 2011
Model Update 8.6.11
Model signals to stay in Asian markets. Confirmation of an Asian tiger trade, indonesia, malaysia, and thailand. Also Japan, India, and China. Gold continues to be bullish.
US is now at the bottom of the list of the rankings. However, the US indicator is still below crisis levels.
Analysis suggests that this next week won't be as bad as last week comparing to other periods. There could be a possible rebound or flat week.
US is now at the bottom of the list of the rankings. However, the US indicator is still below crisis levels.
Analysis suggests that this next week won't be as bad as last week comparing to other periods. There could be a possible rebound or flat week.
Sunday, July 31, 2011
Market Update 7.31.11
We just received confirmation concerning the Asian trade. In the last several weeks we have been bullish on Indonesia, Malaysia etc. Other markets such as China, South Korea, and Thailand were in a grey area between bullish and bearish states. These markets have just transitioned into a bullish state while other markets such as the US and Europe have transitioned to a bearish state. The last of the Asian markets to transition to the bullish state now confirms the Asian trade is on.
What about the US? US government bonds are bullish however, the US equity market is bearish. But not bearish to the point of another financial crisis. The US is still considerably under its crisis threshold. However, investors are fleeing to some safety resulting in a bullishness of US government bonds. These results mean the market is not worried about US default. However, the long-term consequences are bearish for the US market.
What about the US? US government bonds are bullish however, the US equity market is bearish. But not bearish to the point of another financial crisis. The US is still considerably under its crisis threshold. However, investors are fleeing to some safety resulting in a bullishness of US government bonds. These results mean the market is not worried about US default. However, the long-term consequences are bearish for the US market.
Saturday, July 23, 2011
Market Update 7.24.11
This week's results are confirming the an Asian trade and Gold and Silver. Continue investing in these markets. What is curious is that the number one ranked investment in our list is US Government Debt. In addition, gold and silver both have came back as good investments. We received the sell signal in April and now a buy signal. Lastly, the US market has a bad short-term measure. However, the long-term measure is in a stable zone.
This could mean some downside potential in the global financial markets. Even so, the Asian market trade of Indonesia, India, Malaysia, and Japan are continuing their trade which will outlast any short-term downside in the global financial markets.
This could mean some downside potential in the global financial markets. Even so, the Asian market trade of Indonesia, India, Malaysia, and Japan are continuing their trade which will outlast any short-term downside in the global financial markets.
Sunday, July 17, 2011
Market Update 7.17.11
Last week we mentioned that the next trade was Asia. This is how our ETFs did last week compared to the US which we mentioned was in bearish territory.
ETF Market Return
EIDO Indonesia 0.55%
EWJ Japan 0.76%
EWM Malaysia -1.17%
INP India -2.48%
IWM US -2.73%
This past week was a confirmation of the Asia trade. We also received a new signal for another trade, precious metals such as Silver and Gold.
We suggest over weighting Asia and also putting some money into precious metals. Since this is a new signal we recommend allocating a small amount for now increasing your allocation as the trade is confirmed.
We are receiving bearish signals for the developed world except for Japan including the US, Canada, Australia, and Europe. At the beginning of the year, these were the countries to invest in and Asia was the region to not invest in. We are now receiving a signal these trades have switched.
ETF Market Return
EIDO Indonesia 0.55%
EWJ Japan 0.76%
EWM Malaysia -1.17%
INP India -2.48%
IWM US -2.73%
This past week was a confirmation of the Asia trade. We also received a new signal for another trade, precious metals such as Silver and Gold.
We suggest over weighting Asia and also putting some money into precious metals. Since this is a new signal we recommend allocating a small amount for now increasing your allocation as the trade is confirmed.
We are receiving bearish signals for the developed world except for Japan including the US, Canada, Australia, and Europe. At the beginning of the year, these were the countries to invest in and Asia was the region to not invest in. We are now receiving a signal these trades have switched.
Sunday, July 10, 2011
Market Update 7.10.11
We are in the midst of the summer. The US market took a hit and then basically came back in a week. In a previous blog we said that a 7% decline from the high will be the bottom of the decline if we are right about 2011 looking like the summer of 2004. This is exactly what happened. Except the market sprung back a lot faster than in 2004.
What does the model say now? The model is not bullish on the US for the short-term. The long-term indicator is in the middle of bearishness and bullishness, but the short-term indicator is bearish. This means it is hard to determine where the US is going. Therefore, we recommend staying away from the US market for now.
The markets the model likes is:
India
Indonesia
Japan
Malaysia
Mexico
Looks like the Asian markets are the next trade. The model is not bullish yet on other Asian markets such as China, Korea, or Singapore. However, if the Asian trade is the next trade then these markets will start to follow suite.
Based on our analysis of previous periods with the same indicator levels, the US market will fall and rise until the end of September. At that point the US market will have a rally to the end of the year.
What does the model say now? The model is not bullish on the US for the short-term. The long-term indicator is in the middle of bearishness and bullishness, but the short-term indicator is bearish. This means it is hard to determine where the US is going. Therefore, we recommend staying away from the US market for now.
The markets the model likes is:
India
Indonesia
Japan
Malaysia
Mexico
Looks like the Asian markets are the next trade. The model is not bullish yet on other Asian markets such as China, Korea, or Singapore. However, if the Asian trade is the next trade then these markets will start to follow suite.
Based on our analysis of previous periods with the same indicator levels, the US market will fall and rise until the end of September. At that point the US market will have a rally to the end of the year.
Sunday, July 3, 2011
Market Update 7.03.11
There appears to be a changing of the guard now. The developed markets are out, energy is out, natural resources are out. The new trades appearing are India, Indonesia, Japan, Malaysia, and Mexico.
Base on the US indicators I believe there will be a sell of in the US after the 4th of July and then that will be the time to add to the above markets.
It is too early to indicate what will be the new trade for the rest of the year. It appear to be Asian markets which have not performed well this year. We need several weeks to confirm this trade.
Base on the US indicators I believe there will be a sell of in the US after the 4th of July and then that will be the time to add to the above markets.
It is too early to indicate what will be the new trade for the rest of the year. It appear to be Asian markets which have not performed well this year. We need several weeks to confirm this trade.
Sunday, June 26, 2011
market update 6.26.11
The model is still signaling that there are no trades at the moment. That means the market will probably trade sideways until a trade appears. If you followed our advice you would be sitting with cash at the moment. The question is when to use that cash.
Once a trade appears we will write about where to put that money.
Also, take with precaution. Our model suggests that 2011 will be similar to 2004. In 2004 the S/P 500 market fell over 7%. At that point it was a low and the market traded sideways from August to the end of October. If 2011 is going to remain like 2004, the S/P 500 has bottomed. However, the market will then trade sideways until the end of September. If one wants to it may be prudent to use some of that cash little by little. If the market falls more buy more. We are not predicting any hard fall from here on. Any fall in the US market will still be in the 1200 range.
However, the most important signal is where to put the money based on the model results. There is no trade of yet.
Once a trade appears we will write about where to put that money.
Also, take with precaution. Our model suggests that 2011 will be similar to 2004. In 2004 the S/P 500 market fell over 7%. At that point it was a low and the market traded sideways from August to the end of October. If 2011 is going to remain like 2004, the S/P 500 has bottomed. However, the market will then trade sideways until the end of September. If one wants to it may be prudent to use some of that cash little by little. If the market falls more buy more. We are not predicting any hard fall from here on. Any fall in the US market will still be in the 1200 range.
However, the most important signal is where to put the money based on the model results. There is no trade of yet.
Saturday, June 11, 2011
Market Update 6.11.11
The model results this week suggest there are currently no trades right now. This is not a good sign. The next trade will probably reveal itself in the next month or two.
We suggest to remain in cash until that trade appears.
We suggest to remain in cash until that trade appears.
Monday, May 30, 2011
Market Update 05.30.11
The model is suggesting that there is no trade at that moment. The model results still suggest high yield investments such as high yield corporate bonds and REITs, however, there is no clear trade at the moment such as emerging markets, developed markets, gold, or energy.
We received a sell signal last month regarding energy and other commodities as that turned out to be correct. However, our long measures are still bullish on energy and energy-related markets. It could still be a long-term play.
Markets that still look good are Indonesia, India, and the UK.
However, when there is no real trade the model is suggesting it usually means the market will stay flat or head down. We suggest holding a decent amount of cash at the moment.
We received a sell signal last month regarding energy and other commodities as that turned out to be correct. However, our long measures are still bullish on energy and energy-related markets. It could still be a long-term play.
Markets that still look good are Indonesia, India, and the UK.
However, when there is no real trade the model is suggesting it usually means the market will stay flat or head down. We suggest holding a decent amount of cash at the moment.
Sunday, May 22, 2011
Market Update 5.21.11
Model results suggest there are not many market plays out there at this time, which is a sign the market does not look great.
The model likes the developed markets of the UK, Europe, and US. However, the US short indicator is moving up signaling to reduce allocation there.
The model likes certain emerging markets such as Indonesia, India, and Thailand. Chile and China are on the radar.
High yield investments.
If we continue on the 2004 path the US market will see some slight upside going into June and then a down July. This is why we are holding a good deal of cash waiting for August.
However, even though July will be down we do not forecast a lot of volatility. No flash crash, no major market correction, no Fed surprises. The best play is to best against volatility.
The model likes the developed markets of the UK, Europe, and US. However, the US short indicator is moving up signaling to reduce allocation there.
The model likes certain emerging markets such as Indonesia, India, and Thailand. Chile and China are on the radar.
High yield investments.
If we continue on the 2004 path the US market will see some slight upside going into June and then a down July. This is why we are holding a good deal of cash waiting for August.
However, even though July will be down we do not forecast a lot of volatility. No flash crash, no major market correction, no Fed surprises. The best play is to best against volatility.
Monday, May 16, 2011
Market Update 5.15.11
Last week mentioned the US stock market would be flat or down. The US stock market was slightly down. Based on the dynamics we see in the market and in our model we see a very tame US market until July. The US market might go slightly down then slightly up.
Currently the model likes select emerging markets such as Indonesia, Poland, India, and Thailand. It may take a several months for these market to see decent returns. But the early signal for these markets has come.
The model also likes high yield corporate still, REITs, and emerging market debt.
We are currently short energy producing markets for now.
Currently the model likes select emerging markets such as Indonesia, Poland, India, and Thailand. It may take a several months for these market to see decent returns. But the early signal for these markets has come.
The model also likes high yield corporate still, REITs, and emerging market debt.
We are currently short energy producing markets for now.
Sunday, May 8, 2011
Market Update 5.08.11
In our lat blog we suggested the following:
"Last week we suggested the past week would be a down week for the US market. Monday was down 1% but the market rebounded later on in the week. So far we have noticed a that 2011 is similar to 2004. If this similarity is to continue than the next 3-4 weeks will be down weeks.
The model is also signaling to shift out of commodity such as energy and precious metals and go back into select emerging markets such as India, Turkey, Thailand, and Indonesia."
Since that post energy and commodities have down considerably, with some ETFs going down almost 20%. In addition, the US market went up that following week but decreased this past week. Based on our analysis the US market will decline this week or next before rebounding.
The US market has made a sizable shift in our measures and we have sold out of the US market. We have sold out of energy and commodities and have shorted energy related markets such as Russia and Canada.
We continue to like US high yield corporate, emerging market debt, and REITs in addition to select emerging markets such as Poland, Indonesia, Brazil, and Turkey.
The model is now signaling to get back into China and Taiwan. However, we are waiting a week or two since the model is signaling a weak market to continue than a large rebound which will then lead to a down market for June and July.
"Last week we suggested the past week would be a down week for the US market. Monday was down 1% but the market rebounded later on in the week. So far we have noticed a that 2011 is similar to 2004. If this similarity is to continue than the next 3-4 weeks will be down weeks.
The model is also signaling to shift out of commodity such as energy and precious metals and go back into select emerging markets such as India, Turkey, Thailand, and Indonesia."
Since that post energy and commodities have down considerably, with some ETFs going down almost 20%. In addition, the US market went up that following week but decreased this past week. Based on our analysis the US market will decline this week or next before rebounding.
The US market has made a sizable shift in our measures and we have sold out of the US market. We have sold out of energy and commodities and have shorted energy related markets such as Russia and Canada.
We continue to like US high yield corporate, emerging market debt, and REITs in addition to select emerging markets such as Poland, Indonesia, Brazil, and Turkey.
The model is now signaling to get back into China and Taiwan. However, we are waiting a week or two since the model is signaling a weak market to continue than a large rebound which will then lead to a down market for June and July.
Saturday, April 23, 2011
Market Update 4.23.11
Last week we suggested the past week would be a down week for the US market. Monday was down 1% but the market rebounded later on in the week. So far we have noticed a that 2011 is similar to 2004. If this similarity is to continue than the next 3-4 weeks will be down weeks.
The model is also signaling to shift out of commodity such as energy and precious metals and go back into select emerging markets such as India, Turkey, Thailand, and Indonesia.
The model is also signaling to shift out of commodity such as energy and precious metals and go back into select emerging markets such as India, Turkey, Thailand, and Indonesia.
Sunday, April 17, 2011
Market Update 4.17.11
Last week we had a good week for Silver, however, our energy related plays did fall for the week. The model did signify to re-balance, so we did take profits before falling further.
This week the short-term indicators have now indicated to get out of energy, Russia, and Canada.
There was confirmation to add India, Indonesia, Turkey, and Thailand back.
The US market is poised for a down week.
The prediction for the US market is a downward trend for the next three months.
This week the short-term indicators have now indicated to get out of energy, Russia, and Canada.
There was confirmation to add India, Indonesia, Turkey, and Thailand back.
The US market is poised for a down week.
The prediction for the US market is a downward trend for the next three months.
Saturday, April 9, 2011
Market Update 4.09.11
Last week we mentioned to stay with commodities and markets that are commodity plays as well as high yield investments. The commodities did well this past week. Our energy ETF was up 4.5% for the week. Our silver investment was up 8%. Our Russia ETF was only up .5%. Our REIT investment was down 0.86%. Our high yield corporate investment was up 0.82%. Poland was up 4.37%. While the S&P 500 was slightly down.
Our models are suggesting to stick with the current investment mix. The only new addition is to invest in Indonesia. Otherwise stay with the energy and commodity play along with high yield investments.
We also apply a short-term forecast of the US market. All signs point that that US market will trade down at some point in the near future. The model is signaling this will occur in about four weeks. At that point it may be prudent to raise some cash but stay with some of the commodity and energy plays.
Our models are suggesting to stick with the current investment mix. The only new addition is to invest in Indonesia. Otherwise stay with the energy and commodity play along with high yield investments.
We also apply a short-term forecast of the US market. All signs point that that US market will trade down at some point in the near future. The model is signaling this will occur in about four weeks. At that point it may be prudent to raise some cash but stay with some of the commodity and energy plays.
Monday, April 4, 2011
Market Update 4.04.11
Let us review my post two weeks ago. At that juncture the market had fallen 6-7% in the month of March. I said the US market was okay and to not worry about a further pullback. Since then the US market has rebounded back to its highs.
I also noted that Brazil and Easter Europe were breaking out. This last week the Brazil ETF we invest in rose 8%. Not bad for one week. Easter Europe increased 5.5% this past week.
What are the predictions going forward. The are several emerging markets looking good. They include India, Indonesia, and Thailand. I would wait for a small pullback to buy some shares of these markets.
We continue to like commodities and markets that are commodity plays such as Russia and Canada. We like the US and high yield assets such as REITs and High Yield Corporate.
We believe the middle of May will be a good juncture to take some money off the table as the US stock market is poised for a bad month. We will provide more detail when that time comes.
I also noted that Brazil and Easter Europe were breaking out. This last week the Brazil ETF we invest in rose 8%. Not bad for one week. Easter Europe increased 5.5% this past week.
What are the predictions going forward. The are several emerging markets looking good. They include India, Indonesia, and Thailand. I would wait for a small pullback to buy some shares of these markets.
We continue to like commodities and markets that are commodity plays such as Russia and Canada. We like the US and high yield assets such as REITs and High Yield Corporate.
We believe the middle of May will be a good juncture to take some money off the table as the US stock market is poised for a bad month. We will provide more detail when that time comes.
Sunday, March 20, 2011
Market Update 3.20.11
The last two weeks have been volatile. We noted in the last several weeks that we would see a pullback. The model suggested last week there was not going to be too much more downside, 1%. However, the model did not forecast a tsunami in Japan, therefore we witnessed more downside than predicted.
Either way the model is suggesting that the US market is okay. Even with the exogenous events occurring in the world, the model suggests there is not much more downside for the US market. This means do not worry about a 15% correction as some pundits are predicting. The model is suggesting that emerging markets should be stayed away from still. However, there is one emerging market that the model is picking up at the start of its cycle, Brazil. In addition, Eastern Europe is also breaking out. The model also suggests to keep invested in REITs, high yield corporate, and commodities such as energy and natural resources.
Other than those areas and markets that are commodity rich markets such as Canada and Russia, stay away from other markets.
Either way the model is suggesting that the US market is okay. Even with the exogenous events occurring in the world, the model suggests there is not much more downside for the US market. This means do not worry about a 15% correction as some pundits are predicting. The model is suggesting that emerging markets should be stayed away from still. However, there is one emerging market that the model is picking up at the start of its cycle, Brazil. In addition, Eastern Europe is also breaking out. The model also suggests to keep invested in REITs, high yield corporate, and commodities such as energy and natural resources.
Other than those areas and markets that are commodity rich markets such as Canada and Russia, stay away from other markets.
Sunday, March 13, 2011
Market Update 3/13/11
Our indicators have matched the 2003-2004 indicators almost to a tee since November 2003. If this is to continue than the next week should be a down week as well. We are not trying to market time here, but if one were to market time, I would do the following based on our measures. I would hedge this week. If there is a big down day, take your profits from that short position. The following week will either be a huge positive week or flat. If it is flat than the last week of March will be a huge positive week. Once that huge positive week occurs, take profits off the table. Wait for a 5% correction which may last until the second week of May and re-enter. The markets will correct back up and then swing down again before July. Take money off the table before July wait until August and then invest in August for the rest of the year. The next several months will be volatile with up and down swings with a downward trend. Another way to play it is to stay in cash until August with some exposure to the markets listed below.
Again, this is speculative. Our measures have been following 2004 measures for the US.
We have now updated our system. It is now more accurate in timing when to exit and enter positions. Currently, the model is suggesting to invest in the following markets,
USHY
REITs
Poland
Russia
US
Energy
Canada
Natural Resources
These are the markets that are currently ranked the highest based on the relative normalized measure. It can been seen that high yield investments, such as high yield corporate and REITs are at the top. Energy and natural resource countries are also included such as Russia and Canada. The sectors of energy and natural resources are strong.
Energy and natural resources were down big this past week relative to other markets. However, this has not changed our view. The model still likes energy and natural resources, which makes sense from a fundamental point of view in that the capacity to increase output has not increased and in order to obtain more capacity it will take years. Therefore, supply is falling while demand is growing. We invest based on the models which says invest in natural resources and energy.
Our new system detects markets on the move up as well to get in before major up moves. The markets we see are emerging market debt and Brazil. Brazil's stock market has not performed that well over the past year relative to other markets. It is flat since March of last year while other markets are up big. We are starting to see a move in Brazil.
We are also starting to see a move in Australia. The story for Australia is the same as Brazil. Australia has not performed that well compared to other markets in the last year. These markets are both energy and minerals trade with some financial in Australia.
Lastly, we see Indonesia as a potential trade. The Indonesia market was slammed over the past several months and has recovered. We are also looking at China. However, Indonesia and China are on our watch list while Brazil, Australia, and Emerging Market Debt are part of our portfolio.
Again, this is speculative. Our measures have been following 2004 measures for the US.
We have now updated our system. It is now more accurate in timing when to exit and enter positions. Currently, the model is suggesting to invest in the following markets,
USHY
REITs
Poland
Russia
US
Energy
Canada
Natural Resources
These are the markets that are currently ranked the highest based on the relative normalized measure. It can been seen that high yield investments, such as high yield corporate and REITs are at the top. Energy and natural resource countries are also included such as Russia and Canada. The sectors of energy and natural resources are strong.
Energy and natural resources were down big this past week relative to other markets. However, this has not changed our view. The model still likes energy and natural resources, which makes sense from a fundamental point of view in that the capacity to increase output has not increased and in order to obtain more capacity it will take years. Therefore, supply is falling while demand is growing. We invest based on the models which says invest in natural resources and energy.
Our new system detects markets on the move up as well to get in before major up moves. The markets we see are emerging market debt and Brazil. Brazil's stock market has not performed that well over the past year relative to other markets. It is flat since March of last year while other markets are up big. We are starting to see a move in Brazil.
We are also starting to see a move in Australia. The story for Australia is the same as Brazil. Australia has not performed that well compared to other markets in the last year. These markets are both energy and minerals trade with some financial in Australia.
Lastly, we see Indonesia as a potential trade. The Indonesia market was slammed over the past several months and has recovered. We are also looking at China. However, Indonesia and China are on our watch list while Brazil, Australia, and Emerging Market Debt are part of our portfolio.
Sunday, March 6, 2011
Market Update 3.08.11
Last week we suggested to hedge your portfolio for the week. The market tanked on Tuesday and then rebounded strongly on Thursday. Overall the market was flat. Based on last week we do not see any reason to suggest another down week. With the turmoil in the Middle East and possible protests in Saudi Arabia next week, however, anything is possible. Either, we examine the model results and invest based on the model.
When there is a major move in our indicators we hedge our portfolio for the week. Our measures did not move much over the last week. This signals that the probability of a down week is low. However, the type of movement seen in measures in the week before signals something down the road in 4-6 weeks. Therefore, we remain cautious.
Our portfolio is based on three trades.
First, high yield investments. These investments include US high yield corporate, REITs, and emerging market debt.
Second, natural resource and energy plays including markets such as Canada and Russia, energy, silver, and gold.
Third, betting on certain markets are undervalued such as Japan and Australia.
When there is a major move in our indicators we hedge our portfolio for the week. Our measures did not move much over the last week. This signals that the probability of a down week is low. However, the type of movement seen in measures in the week before signals something down the road in 4-6 weeks. Therefore, we remain cautious.
Our portfolio is based on three trades.
First, high yield investments. These investments include US high yield corporate, REITs, and emerging market debt.
Second, natural resource and energy plays including markets such as Canada and Russia, energy, silver, and gold.
Third, betting on certain markets are undervalued such as Japan and Australia.
Sunday, February 27, 2011
Market Update 2.27.11
Last week we mentioned our behavioral measures were in extremely bullish territory which signals a down week. The market was down for the week and our measures have made a sizable movement. The movement usually signifies another down week coming up. We have hedged our portfolio for the week. If the week is a down week we will close the hedge at the end of the week. If the market is flat than close out the hedge. If the market is up, than continue the hedge as movement this signifies another down week to come.
Our portfolio looks like the following. We are holding US High Yield Corporate Bonds, REITs, Canada, Energy, and Russia. All these ETFs held up well for the week. Right now emerging markets are not on our list. We believe that emerging markets will present a buying opportunity sometime during the summer in which then they could rebound 10-20%, but for now they will stay flat or fall.
USHY 11.52%
RE_US 9.24%
Canada 9.59%
Energy 9.06%
Russia 9.83%
US 9.16%
Australia 8.09%
Japan 8.60%
Natural Resources 9.03%
Agg 7.98%
UK 7.93%
Our portfolio looks like the following. We are holding US High Yield Corporate Bonds, REITs, Canada, Energy, and Russia. All these ETFs held up well for the week. Right now emerging markets are not on our list. We believe that emerging markets will present a buying opportunity sometime during the summer in which then they could rebound 10-20%, but for now they will stay flat or fall.
USHY 11.52%
RE_US 9.24%
Canada 9.59%
Energy 9.06%
Russia 9.83%
US 9.16%
Australia 8.09%
Japan 8.60%
Natural Resources 9.03%
Agg 7.98%
UK 7.93%
Tuesday, February 22, 2011
Market Update 2.22.11
We generally post on Sundays. However, given the market activity today and our research in the last several weeks we would like to update you on our view of the markets going forward. It is obviously difficult to say what the markets will do tomorrow or how they will end the week.
We looked back in the history of our indicators and actually 2004 seems to represent 2011 well for the US. The 2000-2002 period saw a decline almost exactly a similar magnitude of the 2008 period. However, from peak to trough 2008 fell by around 15% more. Incidentally the 2003 recovery increased 15% less than the 2009-2010 recovery. This gives us some incidental evidence that the two time periods are similar. Our BFIA measures for February 22nd 2004 are almost identical to today's levels. In 2004 the market did not move very much over the year until October 2004. We believe the same will occur for 2011. The equity market will not move much over the year and reap its gains in a 6 week period. Therefore, we believe now is the time to hold off on all equity investments as there will be a pullback and narrow trading range for most of the year. Currently we are more in favor of developed equity markets than emerging if one is to hold equity. We do see energy making gains for the year. After the pullback we do favor high yielding assets such as high yield corporate bonds and real estate investment trusts until we see signals to put money back into equities.
Summary:
High Yield Corporate
REITs
Energy (Energy companies and oil itself)
Natural Resources (Lower exposure).
If investing in equities: Equity Markets to Outperform are US, Canada, Japan, and Russia. (Possibly Australia and Europe therefore lower exposure). Refrain from emerging markets for now.
There will also be periods to take advantage of shorting the market. It will be the only way to make significant gains for the year.
Once this week plays out we will post our call of whether to short or not.
We looked back in the history of our indicators and actually 2004 seems to represent 2011 well for the US. The 2000-2002 period saw a decline almost exactly a similar magnitude of the 2008 period. However, from peak to trough 2008 fell by around 15% more. Incidentally the 2003 recovery increased 15% less than the 2009-2010 recovery. This gives us some incidental evidence that the two time periods are similar. Our BFIA measures for February 22nd 2004 are almost identical to today's levels. In 2004 the market did not move very much over the year until October 2004. We believe the same will occur for 2011. The equity market will not move much over the year and reap its gains in a 6 week period. Therefore, we believe now is the time to hold off on all equity investments as there will be a pullback and narrow trading range for most of the year. Currently we are more in favor of developed equity markets than emerging if one is to hold equity. We do see energy making gains for the year. After the pullback we do favor high yielding assets such as high yield corporate bonds and real estate investment trusts until we see signals to put money back into equities.
Summary:
High Yield Corporate
REITs
Energy (Energy companies and oil itself)
Natural Resources (Lower exposure).
If investing in equities: Equity Markets to Outperform are US, Canada, Japan, and Russia. (Possibly Australia and Europe therefore lower exposure). Refrain from emerging markets for now.
There will also be periods to take advantage of shorting the market. It will be the only way to make significant gains for the year.
Once this week plays out we will post our call of whether to short or not.
Sunday, February 20, 2011
Market Update 2.20.11
Similar to last week we are bullish on the developed markets including the US, Europe, Japan, Canada, and Australia. We do not like emerging markets at this point except for certain emerging markets such as Russia, now Poland, and South Africa. We do like Mexico as well but sitting on the side lines as far as Mexico is concerned for now. In addition, we like energy and real estate.
Our US measures have reached very bullish territory. Our US long measure is currently 0.62. The last time we seen this measure hit 0.62 was back in February 23rd of 2004. Two weeks later, March 7th of 2004 the market pull backed between 4 and 5%. And then it was the start of a bull market. The last time our short indicator hit its current level was back in September 20th of 2009. The next two weeks the market fell 4%.
We have never seen our long indicator fall below 0.60. We believe this is the floor. Our short strategy is to witness some major movement in our indicator before shorting. We will pursue that strategy going forward. We have not seen any movement
in the indicators so far. We will wait for another two weeks than access the situation because than we believe the market is due to correct around 5%.
At that point we believe the market will continue to rise after the pull back until the summer.
Our US measures have reached very bullish territory. Our US long measure is currently 0.62. The last time we seen this measure hit 0.62 was back in February 23rd of 2004. Two weeks later, March 7th of 2004 the market pull backed between 4 and 5%. And then it was the start of a bull market. The last time our short indicator hit its current level was back in September 20th of 2009. The next two weeks the market fell 4%.
We have never seen our long indicator fall below 0.60. We believe this is the floor. Our short strategy is to witness some major movement in our indicator before shorting. We will pursue that strategy going forward. We have not seen any movement
in the indicators so far. We will wait for another two weeks than access the situation because than we believe the market is due to correct around 5%.
At that point we believe the market will continue to rise after the pull back until the summer.
Sunday, February 13, 2011
Market Update 2.14.11
This time last year our model was heavy in favor of the emerging markets. Our portfolio was about 80-90% emerging market exposure in addition to markets such as Taiwan and Israel, etc.
There has been a turnaround in the portfolio. We now hold very little emerging markets. The only market considered emerging we like is Russia. For now we plan on holding developed market equity, REITs, Energy, and High Yield Corporate Bonds until we see any changes in the model. Our short measures are still indicating that certain emerging markets are good short plays including India, Indonesia, Malaysia, Thailand, and Chile. Below are the following markets we have in our portfolio.
Agriculture
Australia
Canada
Energy
Europe
Japan
Real Estate
Russia
US
USHY
We still predict some pullback in the global markets. We do not see any immediate pullback but predict one this year. Our agent-based indicator for the US is over 1 meaning that it is fairly to slightly over valued. After the tech bust in 2000 and the bottom in 2002 it took 4 years for the US measure to hit 1. After the global financial crisis in 2008 and the bottom in early 2009 it took only two years. The summer of 2006 was difficult. We predict something similar. Once we see our measures change in a significant fashion we will apply a full hedge to our portfolio. We will keep you updated once that occurs.
There has been a turnaround in the portfolio. We now hold very little emerging markets. The only market considered emerging we like is Russia. For now we plan on holding developed market equity, REITs, Energy, and High Yield Corporate Bonds until we see any changes in the model. Our short measures are still indicating that certain emerging markets are good short plays including India, Indonesia, Malaysia, Thailand, and Chile. Below are the following markets we have in our portfolio.
Agriculture
Australia
Canada
Energy
Europe
Japan
Real Estate
Russia
US
USHY
We still predict some pullback in the global markets. We do not see any immediate pullback but predict one this year. Our agent-based indicator for the US is over 1 meaning that it is fairly to slightly over valued. After the tech bust in 2000 and the bottom in 2002 it took 4 years for the US measure to hit 1. After the global financial crisis in 2008 and the bottom in early 2009 it took only two years. The summer of 2006 was difficult. We predict something similar. Once we see our measures change in a significant fashion we will apply a full hedge to our portfolio. We will keep you updated once that occurs.
Sunday, February 6, 2011
Market Update 2.06.11
We still view a similarity of 2011 with 2006 and therefore, see a pullback lasting 2-3 months but the S&P 500 ending above 1400 for the year. Based on our agent-based measure we predicted some pullback. We saw a major down day on January 30th but the market came back this last week. As of right now we do not see any immediate signs of a pullback. We do see February not making any major gains or losses. We will be running our measures every week to determine when we see a better picture of a pullback.
The investments we like based on all our measures are:
1. US high yield bonds
2. Russia
3. Mexico
4. REITs
5. Canada
6. Korea
7. Energy
8. US
9. Japan
10. Taiwan
11. South Africa
The investments we like based on all our measures are:
1. US high yield bonds
2. Russia
3. Mexico
4. REITs
5. Canada
6. Korea
7. Energy
8. US
9. Japan
10. Taiwan
11. South Africa
Sunday, January 30, 2011
Market Update 1.30.11
Last week we were concerned that the US market would drop and volatility would rise as our agent-based indicator had risen above one. We forwent buying the VIX future and purchased a VIX call option last week. On Friday the VIX rose 24 percent, its biggest daily percentage jump since May 20.
It is always interesting to compare our most recent data to historical data. If we go back to 2006 the first time the US agent-based indicator rose above 1 was January 22nd, 2006. It then decreased until the second week of February and rose back over 1 until the end of May where the market was poor for the next three months until rising back over the last quarter. It is difficult to compare to the past because we believe the markets are faster in processing information. Therefore, one year in 2004 is similar to six months in 2011 if comparing those two years. However, it does give us some insight as behavior in markets never changes, only how the magnitude. Even so, we do see similar events occurring this year as the US market has increased significantly over the last two years and our data suggests that once the agent-based indicator rises above one it takes time before it can really drive above 1. We plan on seeing more than a couple of weeks of downside movement sometime during the year.
Our other measures are continuing to suggesting shorting certain emerging markets. Our short-term indicators are way over their threshold for India, Turkey, Thailand, and Indonesia. Markets that are coming up near their thresholds include Chile and Malaysia.
Even so, we do like Chile and Malaysia for the long-term but the short-term dynamics do not look good for these markets.
For our long portfolio we have sold out of the markets where we do not like the short-term dynamics as mentioned above and are keeping the ones we like such as Russia, High yield corporate debt, mexico, korea, and commodities. For our long-short portfolio, we are currently in a net short position with an open call option position on the VIX. We plan to stay net short for the next two weeks in February unless we see any significant changes in the model.
It is always interesting to compare our most recent data to historical data. If we go back to 2006 the first time the US agent-based indicator rose above 1 was January 22nd, 2006. It then decreased until the second week of February and rose back over 1 until the end of May where the market was poor for the next three months until rising back over the last quarter. It is difficult to compare to the past because we believe the markets are faster in processing information. Therefore, one year in 2004 is similar to six months in 2011 if comparing those two years. However, it does give us some insight as behavior in markets never changes, only how the magnitude. Even so, we do see similar events occurring this year as the US market has increased significantly over the last two years and our data suggests that once the agent-based indicator rises above one it takes time before it can really drive above 1. We plan on seeing more than a couple of weeks of downside movement sometime during the year.
Our other measures are continuing to suggesting shorting certain emerging markets. Our short-term indicators are way over their threshold for India, Turkey, Thailand, and Indonesia. Markets that are coming up near their thresholds include Chile and Malaysia.
Even so, we do like Chile and Malaysia for the long-term but the short-term dynamics do not look good for these markets.
For our long portfolio we have sold out of the markets where we do not like the short-term dynamics as mentioned above and are keeping the ones we like such as Russia, High yield corporate debt, mexico, korea, and commodities. For our long-short portfolio, we are currently in a net short position with an open call option position on the VIX. We plan to stay net short for the next two weeks in February unless we see any significant changes in the model.
Saturday, January 22, 2011
1.23.11
We are at an interesting juncture right now according to our agent-based measures. Again we use two measures. The first measure determines exit and entry points as well as which markets to overweight and underweight. The agent-based measure predicts short-term dynamics in the financial markets. The BFIA agent-based measure has crossed 1 for the first time since 2007. This means the US market is now fairly valued. In order to increase beyond one the US market must correct. We therefore predict short-term volatility ahead. In addition, looking back at our historical data the first time this measure hit 1 after the tech crisis was January 22, 2006. We believe we will see similar dynamics from that time period. This means that the US market will experience some downside volatility over the last week of January into the month of February. We have therefore closed all positions and will long a futures contract on the VIX. We are bullish on the US over the 2011 year including other markets such as Russia, Korea, South Africa, and Chile which are energy and commodity plays. Once the agent-based measure departs from the 2006 measure we will then close that position and continue to long the markets we favor as noted above. Let us see what happens this week and into February.
Monday, January 17, 2011
Market Update 1.17.11
Recap from last week. We were bullish on Russia and bearish on India. For the week India, INP, fell by 5.9% and Russia, RSX gained 6.4%. Not bad for a week.
Last year our indicators were extremely bullish on all emerging markets and did not favor developed markets at all. This year our indicators are signaling to specific emerging markets and favoring some developed markets. Based on our indicators here are the markets we are long:
1. South_Africa
2. Mexico
3. Korea
4. Malaysia
5. Russia
6. Chile
7. USHY
8. Israel
9. Natural Resources
10. Thailand
11. Canada
12. US
13. Turkey
14. Indonesia
15. Japan
Are indicators are signaling to hedge completely or short:
India
US investment grade bonds
Indonesia
Turkey
India, Indonesia and Turkey are markets we like for the long-run, however, our model suggests that we hedge these positions for the short-term.
Last year our indicators were extremely bullish on all emerging markets and did not favor developed markets at all. This year our indicators are signaling to specific emerging markets and favoring some developed markets. Based on our indicators here are the markets we are long:
1. South_Africa
2. Mexico
3. Korea
4. Malaysia
5. Russia
6. Chile
7. USHY
8. Israel
9. Natural Resources
10. Thailand
11. Canada
12. US
13. Turkey
14. Indonesia
15. Japan
Are indicators are signaling to hedge completely or short:
India
US investment grade bonds
Indonesia
Turkey
India, Indonesia and Turkey are markets we like for the long-run, however, our model suggests that we hedge these positions for the short-term.
Sunday, January 9, 2011
01/09/11
Our agent-based measures now view the US market as fairly valued. We do predict the US market will increase slightly over the year, however, we do not see any more major upside as the market is currently fairly valued. One market we see as under valued is the Japanese market. We are reducing our exposure to gold now as we see the past volatility as a sign to reduce exposure and re-allocate to natural resources instead. We still see warning signs in India which also applies to other Asian markets as they are highly correlated. We will keep our exposure net zero until we see improvement in our measures. One market that was in the bottom of our list and has risen toward the top is Russia, RSX. We are now bullish on Russia, more so than the other BRIC countries.
We still like certain key markets such as:
Mexico, Malaysia, and Korea.
We still like certain key markets such as:
Mexico, Malaysia, and Korea.
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