"‘As the economy starts to pick up in reaction to all this stimulus and this anti-austerity that's sweeping the world now, those cyclical stocks will really get a second wind,’ said Anthony Chan of Chase Wealth Management.” Story at…
http://www.cnbc.com/id/100711807
While cyclical stocks, as measured by the Morgan Stanley
Cyclical Index, have outperformed the S&P 500 by about 1% over the past
10-days and less over the past 20-days, cyclicals have underperformed over
longer periods, i.e. they have not kept up with advances made by the S&P
500. Further, I have found that longer
term analysis is more predictive of the future, probably because investors tend
to look several quarters into the future so the longer look-back period is
helpful when comparing market sectors. (Markets
bottom before a recession is over and make tops before a recession begins so a
longer term perspective can sometimes be helpful.) The underperformance of the cyclical stocks
over the longer term is a concern, but since the cyclicals are still advancing,
cyclical stocks are probably a good way to chase this aging bull-market for
those who wish to play that game.
For me, I choose not to play. I remain uncomfortable with this rally.
HISTORIC RALLY
“In past 20 years, yes 20
years, there have only been 6 rallies with more percentage gain than this one
without a 5% correction, and they all started after nasty corrections that
lasted months or years, and were either of long durations (like the biggest
rally of them all, from Dec 8 1994 to Dec 15 1995…or after big drops, like in
march 2009.” – Trader board comment
This has been an historic rally, with extreme
bullish-sentiment and the S&P 500 is now 11% above the 200-dMA. The markets may breakdown soon; but I have
been wrong a lot recently.
MARKET RECAP
Tuesday, the S&P 500 was up 0.5% to 1,626 (rounded), another new high for the S&P 500.
Tuesday, the S&P 500 was up 0.5% to 1,626 (rounded), another new high for the S&P 500.
VIX was also up over 1.3% to 12.83. So perhaps the options boys are beginning to
have some minor doubts too.
NTSM
Tuesday, the NTSM analysis was again HOLD at the close.
SENTIMENT is Sell due to its extreme bullish level of 66%-bulls as of Monday’s
close. (That means that twice as much
money is now bet long vs. short in the Guggenheim/Rydex funds I track.) The VOLUME indicator (a variant of
on-balance-volume) is positive. PRICE
and VIX are neutral.
MY INVESTED POSITION
I remain about 20% invested in stocks as of 5 March (S&P 500 -1540). My reasoning may be found at…
http://navigatethestockmarket.blogspot.com/2013/03/why-i-got-mostly-out-of-stock-market.html
The NTSM system sold at 1575 on 16 April. (This is just another reminder that I should follow the NTSM analysis and not act emotionally – I am under-performing my own system by about 2%!)
I have no problems leaving 20% or 30% invested. If the market is cut in half (worst case) I’d
only lose 10%-15% of my investments. It
also hedges the bet if I am wrong since I will have some invested if the market
goes up. No system is perfect.
