Former NAAIM Chairman and President Dave Moenning helped construct the NAAIM Indicator Wall as a member benefit back in 2013. As he continues to send weekly updates for the wall, it seems helpful to explain to members how they might get the most benefit out of using indicators and the NAAIM Indicator Wall, in particular. While this information may not be of interest or need to all our members, there are likely to be some who would find the following article from Dave of interest.
A Cold, Hard Look at the State of the Indicators
by Dave Moenning
I have been suggesting for some time now in my oftentimes meandering morning market missives that the risk of a meaningful correction in the stock market has become elevated. I’ve relayed many of the reasons why I come to this conclusion such as the state of absolute valuation levels, the inordinate length of time since the last meaningful correction, long-term indicators flashing sell signals, and weakening market internals.
It is important to note that I don’t make this type of statement lightly. I believe there is entirely too much fear mongering in the financial media and my views are NOT intended to cause anyone to run and put their head in the sand. No, the goal is to help folks recognize that there are times to put the pedal to the metal in their portfolios and times to utilize some caution. And in sum, we believe this is the latter type of environment.
It is also important to realize that this stance is not based on any type of gut feel, personal opinion, or prognostication about what we expect to happen next in the market. As long-time readers know, I simply abhor making predictions of any kind about the market.
Having been in the business of managing other people’s money for more than 27 years now, I can say with absolute certainty that while there have been many gurus that have made fantabulous calls (Joe Granville, Robert Prechter, Stan Weinstein, and Elaine Garzarelli among others leap to mind) on what the market was going to do next, no one has been able to “call” what Ms. Market will do with any degree of consistency (and the fact that younger readers may not recognize any of the names listed above is a case in point).
The bottom line is I firmly believe that making predictions is a great way to make headlines, but a lousy way to manage money.
It is for this reason that as money managers, we believe the only way to get the big moves right on a consistent basis is to put away your opinions on what you think will happen next, check your emotions at the door each morning and instead focus on the message from unemotional market models.
I know, I know, I’ve beaten this drum a time or twenty over the years. But with a market that has managed to frustrate investors of all shapes and sizes lately, I thought it might be a good time to take a cold, hard look at what the key market indicators are saying right now.
The NAAIM Indicator Wall
As President of NAAIM (National Association of Active Investment Managers) I worked with a team of market pros (the group included Ned Davis Research) to develop something called “The NAAIM Indicator Wall.” The idea was to provide NAAIM members with a complete rundown of key market indicators on a weekly basis.
To be clear, the “Indicator Wall” is NOT a timing vehicle. I.E. it is NOT designed to tell folks when to buy and sell. In addition, there is NO predictive value in the “wall.” No, this repository of key market indicators is intended to provide readings on the state of the various factors that tend to drive stock prices and to give a clear, unemotional take on the risk/reward environment.
Thus, I thought that providing a peek at this week’s “Indicator Wall” might help folks to get a feel for the state of the current market environment and perhaps provide some color on my stance that risk is currently elevated.
– See more at: State of the Markets Report 52814
NAAIM Indicator Wall (password-protected)
NAAIM Members – to get the password, visit the NAAIM Community – REGULAR Member Discussion Group and search “Indicator” or Contact NAAIM
