Party On, Wayne!

By: David Moenning, Heritage Capital Research

Published: 2.19.19

The joyride to the upside continued in the stock market last week as the S&P 500 surged another 2.5%. If my calculator is correct, that means the venerable blue-chip index is now up 10.7% so far in 2019 and has put in a nifty gain of 18% since the December 24th panic attack. Impressive.

What is perhaps even more impressive from my seat is the reversal in Ms. Market’s mood. Recall that back in December, traders assumed the worst. Everything was bad. There was nothing positive to be found anywhere. All news was bad news. Even the good news (record holiday shopping for example) was ignored because the markets were doomed. The Fed had lost its way. The administration was planning to flush the hundreds of billions it spent on tax cuts down the drain with the trade war. And the “R-Word” (recession) dominated the global view. Insert sad emoji here.

Now fast forward eight weeks. The S&P has soared. The index is back above its 200-day moving average. There is talk of a new bull market. I’m getting calls about keeping up with the stock market again. Everything is good. Nothing is bad. And any news that happens to fall in the disappointing category can simply be ignored. Amazing what an 18% gain in a couple months can do, right?

Why the sudden mood swing, you ask? Actually, that’s an easy one…

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The Message From the NAAIM Indicator Wall: The Fundamentals Appear Solid

By: National Association of Active Investment Managers

Updated: 2.17.19

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 Fundamental Factors Board, which is a group of longer-term models designed to determine the overall fundamental backdrop to the “state” of the markets.

Our take is the Fundamental Factors board currently suggests that the backdrop for equities remains constructive. For now, the board says the bulls should be given the benefit of any doubt and the dips should be bought.

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.

Link to NAAIM Indicator Wall

No Cigar For The Bears!

By: Paul Schatz, Heritage Capital LLC

Published: 2.15.19

I had thought by now that stocks would have paused or taken a little 1-2% mild pullback. There was evidence last week. There was evidence over the past two days. So far, no cigar for the bears. This is very much typical behavior when the stock market emerges from a major bottom as we saw at Christmas. They just don’t give you a chance to comfortably buy after the train leaves the station. Any and all pauses and pullbacks are shallow until a real one does come which pretty much signals an intermediate-term period of pause.

But things are looking good right now. For example, the NYSE A/D Line which you can see below is but one strong day from all-time highs! This makes me chuckle as I vividly recall how the vast majority of pundits said a bear market had begun and 2019 would be disastrous for stocks. ….

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Is there a New Message from the Markets?

By: Jeffrey Miller Dash of Insight

Published: 2.16.19

In my last edition of WTWA I took note of the growing emphasis on technical indicators, even for long-term investors, asking whether the 200-day moving average should be considered. As often happens these days the stories focused on political developments and the surprise Amazon (AMZN) decision not to build a second headquarters in New York. The S&P climbed above the 200-day MA on Friday without much fanfare. Next problem, please?

I placed special emphasis on the economic news this week. Understanding the economic indicators and trends helps keep investors on the right track. Without this perspective it is easy to overreact to a single bad report or even a small decline from a peak. Don’t get fooled by a chart with a big red arc over the recent peak and an arrow pointing sharply lower. Every big decline starts at a peak, of course, but some precede plateaus or new peaks. Only time and more information will help determine which.


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Update: 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 current conditions. The model targets a normalized allocation of 60% stocks and 40% Bonds.

Here is this week’s model allocation:

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.

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 Broad Based Advance

By: Rob Bernstein, RGB Capital Group

Published: 2.14.19

I have made a few adjustments to the Market Monitor this month. While the changes are not major, I believe the adjustments will help communicate a clearer message. The report is now broken down into two primary sections: 1) Stock Market Environment and 2) Bond/Income Environment. The Stock Market Environment is intended to provide an overall feel for the state of the equity markets.

My assessment includes a review of the primary cycles (secular and cyclical), the technical environment (including price trends and momentum), the fundamentals of the market (economic, earnings, monetary, inflation and valuation) and a newly added credit conditions section. Credit conditions are based primarily on the state of the high-yield market (i.e. junk bond indicator), which is one of the best indicators of overall risk that I have found.

The Bond/Income Environment is intended to provide an overview of the economic and interest rate sensitive bond and income groups that I follow. The bond/income groups tend to be less volatile but at times can provide extremely good risk-adjusted returns which can be beneficial to conservative investors as well as more aggressive investors looking to manage overall portfolio volatility.

Link to the Full Article

Are We There Yet?

By: Sam and Bo Bills Bills Asset Management

Published: 2.15.19

There are many reasons to doubt this rally. It has come too far too fast. The technical damage done in the 4th quarter of 2018 is too much. The trade tariffs remain a significant hurdle. The government is divided with investigations starting on many fronts. The Mueller report is due out anytime. World economies are slowing and some near recession territory. The
strength of the US economy is in some doubt. Etc, etc. The reasons to doubt are numerous and, yet, the market marches on.

The power and influence of the Fed (and world banks) is not something to trifle with. Never fight the Fed. And so, with the Powell pivot a few weeks ago, the markets continue to believe that any weakness in the markets will be met by an accommodative Federal Reserve. The thinking has served this market well for several years and may well continue for some time. However, at some point in the future, either the Fed will not be so accommodative or even a dovish Fed will not be able to withstand the selling. But are we there yet?

Link to the Full Article

The Trend Is Your Friend

By: Dexter P. Lyons Issachar Fund

Published: 2.19.19

I am holding positions in the Cloud, Health and Bond space as they appear to be under institutional accumulation. I am seeing both strong fundamentals (sales and earnings) and technicals (chart patterns) and these “themes” appear to be in favor. Cloud Computing is storing and accessing data and programs over the Internet instead of your local computer. More and more businesses are moving to Cloud based services especially as Internet speeds increase (5G) and prices decline. Historically, Cloud and Health stocks have been very little affected by the China Trade War and if it is resolved shortly, I would still expect “big money” may support these themes. Bonds are generally doing well mainly because of an anticipated economic slow-down therefore I believe the market does not expect the Fed to raise rates any time soon. I happen to think the next move by the Fed will be to lower rates. I am seeking to buy leading stocks on weakness after exhibiting strength with the highest quality fundamentals, exhibiting the most strength in their industry groups.

Bottom line: The trend is your friend and the trend has continued up! Junk Bonds are also trending higher and they have already taken out their October highs and trading near all-time highs. I believe this bodes well for the market and I expect the indexes may take out their highs as well. If I am wrong, I will be quick to do what is necessary to minimize risk in an effort to maximize our gains. I wish you well!

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Weekly Update: The NAAIM Member Exposure Index

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.

For example, at the beginning of October, with the stock market near all-time highs, the NAAIM Exposure Index stood at approximately 90%. However, by the end of November – and before December’s precipitous drop – the exposure index had dropped to 53.2%. Currently (mid-February) the Exposure Index is above 80%.

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.