NAAIM Speaks is bi-monthly newsletter containing market insights and analysis from NAAIM member firms. “Speaks” is designed to provide a plethora of market analysis, indicators, some occasional humor, as well as a summary of NAAIM’s proprietary Dynamic Asset Allocation Model and Managers Exposure Index. The report is for informational uses only and is not to be construed as investment advice.

Bear Camp Can’t Be Happy

By: David Moenning, Heritage Capital Research

Published: 11.4.19

Bear Family

Our furry friends would seem to have an abundance of firepower at their disposal. For example, there is the ongoing trade spat, which seemingly improving with China (or not, depending on the day, of course!), is just getting started with the folks across the pond. There is #GlobalGrowthSlowing, which can’t really be disputed, even by the most ardent bulls. There is the punk manufacturing data here at home. There is the third straight quarterly decline in earnings. There is the threat of recession. There is record negativity seen among investing pro’s in Barron’s most recent Big Money Poll. And now an official impeachment procedure of sorts, which is likely to create some fireworks in Washington as it plays out.

And yet, the S&P, the NASDAQ, and the total market indices all finished the week at all-time highs, with the DJIA not far behind. And don’t look now fans, but the smallcaps, midcaps, banks and industrials are all starting to move up in earnest. If everything is so bad, how can this be happening, a bewildered bear might ask…

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Dow Joins The Party, But…

By: Paul Schatz, Heritage Capital LLC

Published: 11.5.19

S&P 500 Chart

Greetings from 36,000 feet on some bumpy air, which is the norm when I fly. On Monday, the Dow Industrials joined the S&P 500 and NASDAQ 100 in fresh, all-time high territory. That’s now three of the five major stock market indices which have accommodated my bullish forecast. The last two, S&P 400 and Russell 2000 still have a ways to go, but I am still very optimistic that they will join their cousins later this quarter or by early 2020. Both lagging indices are behaving constructively with solid foundations to launch higher.

With all that said and the endless patting myself on the back for being so bullish, I do not believe adding new money nor getting more aggressive is the right play here…

So, the question is…

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Is Sentiment A Factor?

By: Jeffrey Miller Dash of Insight

Published: 11.4.19


Last week, we wrote about avoiding the headlines and instead focusing on how individual stocks and the overall market react to news. In a similar vein, it pays to ignore investor sentiment or even consider it a contrary indicator to investing success. We are conditioned in society to want to buy “bargains” or things on sale. At the same time, perhaps the most bullish thing a market can do is make a new all time high in price. At a new all time high, holders of stock are at a profit and there is less urgency to sell. While intuitively it makes sense that a market at an all time high is bullish, our behavioral biases can make it uncomfortable to invest when the market is “expensive.” When sentiment is bearish, typically investors are holding cash on the sidelines which can act as fuel when the fear of missing out overwhelms the original fear that kept them on the sidelines.

The topic is a controversial one for expert traders. A Google search on sentiment trading yields 63 million hits. Quantinsti has a nice summary of sentiment indicators. Some of these are based upon surveys, but others draw upon trading data. One measure described in the article is the put/call ratio…

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The Message From the NAAIM Indicator Wall: Time To Take A Break?

By: National Association of Active Investment Managers

Updated: 11.4.19

The NAAIM Indicator Wall provides a weekly update to a robust array of stock market indicators. The “wall” includes readings and explanations of indicators and/or models in the areas of price/trend, momentum, key price levels, overbought/sold readings, sentiment, monetary, economic, inflation, and market cycles.

This week, we’re featuring the Early Warning Board, which is designed to suggest when the table is set for the trend to “go the other way” for a while.

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Link to NAAIM Indicator Wall

Note: The Indicator Wall is a benefit provided to NAAIM Members and is password protected. To obtain a temporary password, contact NAAIM at 888-261-0787.

Mining the NAAIM Indicator Wall for Real World Applications

Len Fox at Scarecrow Trading, who is a two-time winner of the NAAIM Shark Tank Active Investing Strategy Competition developed a couple of portfolio strategies based on the NAAIM Indicator Wall. Below is an update of the two portfolios Scarecrow runs:

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Feel free to contact Len or his team about the methodology used in these portfolios at (952) 250-7453.

Breaking For The Border

By: Rob Bernstein, RGB Capital Group

Published: 11.4.19

The market is currently healthy and showing very bullish signs.
The S&P 500 Composite Index broke out of its six month
trading range last week with a definitive penetration through
the top of that range. Small-cap stocks (not shown) are near
their 2019 highs and appear to poised for an upside breakout.
Junk bonds (not shown) continue to trend up above their 50-
day moving average and are pointing to a healthy market
environment. It appears that the balance between buyers and
sellers has been resolved in favor of a continuation of the bull

The NAAIM Dynamic Allocation Model

Designed to be a value-add benefit to membership, NAAIM offers a Dynamic Asset Allocation Model based on the NAAIM Indicator Wall of indicators and models. The overall objective of the model portfolio is to dynamically adapt to changing market environments and to keep equity exposure in line with conditions. The model targets a normalized allocation of 60% stocks and 40% Bonds.

Here is this week’s model allocation:

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The model has been run live on the NAAIM website for several years and has demonstrated the ability to reduce exposure to market risk during negative environments such as those seen in 2015-16 and 2018.

More on the Dynamic Allocation Model and Historical Readings

The NAAIM Dynamic Allocation Model is for illustrative and informational purposes only, and does not in any way represent an endorsement by NAAIM or an investment recommendation.

A Duck Is Still A Duck

By: Sam and Bo Bills Bills Asset Management

Published: 11.1.19

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As expected, the Fed lowered rates by another ¼% on Wednesday. Also as expected, Chairman Powell was asked about the
expansion of the Fed’s balance sheet. Fed officials reiterated that the expansion is not quantitative easing but are a “purely technical measure.” Call it what you may, but a duck is a duck. The increase in liquidity will and is finding its way into the markets possibly explaining some of the rally over the last few weeks. Adding fuel to the fire this morning, the monthly jobs report came in much stronger than expected. The headline number modestly beat expectations but revisions to prior months added to the excitement. The combination of a Fed that is willing to back stop the market and an economy that is showing some signs of regaining its footing, sent the markets higher this morning and they have not looked back. We’ll see how the market closes but…

Link to the Full Article

Watch List Full of Low P/E Stocks

By: Dexter P. Lyons Issachar Fund

Published: 11.4.19

My watch list is full of low P/E stocks instead the usual higher P/E growth stocks. My positions used to consist of higher P/E multiple stocks, but the market has not been kind to them lately, so I sat on the sidelines. The character of the market seems to be changing in favor of rewarding Value (low P/E) over Growth (higher P/E) stocks. I am excited at what I am seeing develop in the market. My junk bond market indicator is still trending higher indicating that investor’s appetite for risk is still strong, so I am making a list and checking it twice…

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The NAAIM Member Exposure Index: High End of the Range

The NAAIM Exposure Index represents the average exposure to US Equity markets as reported by our members in the organization’s weekly survey. Note that many NAAIM members are risk managers and tend to reduce exposure to the markets during high risk environments.

Below is last week’s exposure reading. We note that the current exposure is approaching the high end of this year’s range.

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More on the NAAIM Exposure Index

NOT INVESTMENT ADVICE. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Investors should always consult an investment professional before making any investment.

Tags: NAAIM, NAAIM Speaks, Stocks market analysis, Stock Market Analysis, Stock market, stock market indicators, David Moenning, Paul Schatz, Jeffrey Miller, Rob Bernstein, Sam Bills, Bo Bills, Dexter Lyons, NAAIM Exposure Index, NAAIM Dynamic Allocation Model, Len Fox