Year End Commentary

Year End Commentary - December 27th
The last week of the year usually has a bias to the upside, but with the market up so much since the election, I would be surprise if it rallied much further in these last days of December.  On the other hand, I don't think there will be much selling in this last  week because most investors want to move their gains into 2017 and have the possibility of a lower tax rate.  The Summation index doesn't seem to have much momentum to break through the 1000 level.  If it turns down from there, the market could have a tough January.   One stock I want to highlight is Nvidia.  It is on the list of top stocks on this site.  Nvidia looks like it is making a climatic move.  The stock is up almost 30% in the 10 days. You add that on to what the stock has done over the last year and you what fits the description of a climatic price move. Sometimes there is a rush at the end of a rally to the strongest couple of stocks in the market.  That seems to occurring in Nvidia.  Keep a close eye on its price action.  If it tops, it could give an indication of where the market is going in the near future.

Stock Lists and Charts updated for week ending 12/23/2016

Stock Lists, Stocks Grades and charts have been updated as of 12/23/2016.

Check out the site Quan0cracy at http://quantocracy.com/. It is a mashup on quantitative trading links.

Reminder: A new chart was added to the Model Lists of Growth Stock Ideas Tab. The chart is under the heading “+ Click here to see the Relative Strength Chart of the Index”. It shows the Relative Strength of the GPA38 Index compared to the S&P500. If you click on the heading it will expand to show you the chart.

Reminder: A new chart was added to the Summation Index tab. It shows the Summation Index for 5 months, so the recent movement of the Summation Index and the oscillator can be seen more clearly. It is called the “Short term Adjusted Summation Index”. The chart can be hidden or expanded by clicking on its title.

Stock Lists and charts updated

Stock Lists, Stocks Grades and charts have been updated as of 12/16/2016.

A new chart has been added to the Model Lists of Growth Stock Ideas Tab. The chart is under the heading “+ Click here to see the Relative Strength Chart of the Index”. It shows the Relative Strength of the GPA38 Index compared to the S&P500. If you click on the heading it will expand to show you the chart.

Reminder: A new chart was added to the Summation Index tab. It shows the Summation Index for 5 months, so the recent movement of the Summation Index and the oscillator can be seen more clearly. It is called the “Short term Adjusted Summation Index”. The chart can be hidden or expanded by clicking on its title.

Critical Juncture

Critical Juncture - December 14, 2016
The Federal Reserve raised interest rates a quarter of a point today and the markets were down, but it could have been a lot worse.  With indications that they could raise rates faster than most were expecting, the market could have really been hit.  The DJIA gave up 118.
The market is at a critical juncture as measured by the Summation Index.  The Summation Index measures liquidity in the markets by tracking the number of advances vs. declines.  If you look at the Summation Index currently, it is approaching the 1000 level.  If it can't get through the 1000 level and starts to fall from here, the markets could suffer some tougher times.  If you study the Summation Index, the best performance in the markets occurs when the Summation is above 1000.  Between 0 and 1000, the markets are more neutral and below 0 there are declining markets. There are just 11 trading days left in 2016.  Many may want to carry gains into the new year and possibly pay lower taxes.  That might keep the markets from a substantial pullback until January.   The key is to watch those critical levels on the Summation Index.

Market Powers Higher

Market Powers Higher - December 7th

Defying many, the market does not quit.  The Dow, NASDQ and the S&P 500 are all up more than 1% today.  We might see some stalling at these levels because this is one of the largest price moves since the election when the rally began.  If you are invested, enjoy the ride and if not you will have to look for pullbacks on some of the stronger stocks.  Check the model lists for names that could be buy candidates. The Steel Group continues to lead but there are many other groups that are also being pulled higher.  

Stock Lists, Stocks Grades and charts have been updated as of 12/2/2016.

Stock Lists, Stocks Grades and charts have been updated as of 12/2/2016.

A new chart has been added to the Summation Index tab. It shows the Summation Index for 5 months, so the recent movement of the Summation Index and the oscillator can be seen more clearly. It is called the “Short term Adjusted Summation Index”. The chart can be hidden or expanded by clicking on its title.

Another chart has been added to "Model Lists of Growth Stock Ideas” tab. It shows Relative strength of the “Final Growth GPA 3.8” index. This reveals if growth stocks are working in the current market environment.

When the Relative Strength line is going up the “Final Growth GPA 3.8” index is stronger than the market (SPY). Growth stocks and the market do not move in lockstep all the time. The market index includes value stocks as well, so when growth stocks are not working and value stocks are working the two indices are not in sync.

In the current market environment value stocks are doing better than growth stocks. This can be inferred from the Relative strength chart of the “Final Growth GPA 3.8” index and from the growth vs value chart. Also in “Sector ETF Analysis” we see only value type of sectors showing strength. There are no growth sectors showing up.

Breath extremely positive; Market undergoing consolidation

After the Trump election money moved back into stocks and breath jumped as shown by the Summation Index. On Nov 21 the oscillator on the summation index went over 1000 showing that a lot of stocks were participation in the rally. The Summation Index chart can be seen by clicking on the “Summation Index” tab at the top of the page.

Rallies seldom go straight up. Once the breadth becomes extremely positive, as is the case now, there tends to be pullback or consolidation. We are at that stage,

If this rally has further upside then the pullback/consolidation will be orderly and it will be aggressively bought.

Stock Lists and charts updated

Stock Lists, Stocks Grades and charts have been updated as of 11/25/2016.

A new chart has been added to the Summation Index tab. It shows the Summation Index for 5 months, so the recent movement of the Summation Index and the oscillator can be seen more clearly. It is called the “Short term Adjusted Summation Index”. The chart can be hidden or expanded by clicking on its title.

Medium-term uptrend with short-term pullback

For the medium-term we have a strong market uptrend as indicated by the summation index oscillator moving above 1000. There is also a very high probability of a short-term pullback in the market. This is indicated by the number of stocks moving up 50% in one month more than 20. If a short-term pullback does happen, it is a good opportunity to add more money to stocks.

The market is very strong and can be described as a "lock out market."  This is a market where most investors missed the turn and now can't find buyable entries to get invested.  If you weren't buying during the first few days of the rally, you are in most cases to late to buy the leading stocks.  You now either have to wait for a pullback or a new base to form.  The model list of stocks, that I go through almost every day, is a great starting place for ideas.  The problem right now is that many are too extended in price.  Financials, Iron Ore and Copper are some of the newest groups emerging since the election.  Over the next couple of weeks some in those areas might provide some possible buys. Freeport-McMoran, (FCX) is example of a stock that actually started to move before the election, rallied almost 30%, consolidated and jumped up again today.  That is the type of setup we have to keep an eye out since so many are extended in price.

Stock Lists and charts updated

Stock Lists, Stocks Grades and charts have been updated as of 11/18/2016

Market theme after the election

If rates go up soon the dollar will get stronger compared to other currencies. This is begin borne out by gold and silver sectors showing trouble in their monthly chart pattern along with VWO (FTSE emerging markets). The REITS are showing signs of trouble, they should go down if rates go up. VHF (Financials) are showing strength. If rates go up banks should perform well. So one of the themes after the election has been that rates may go up according to the price behavior of rate dependent sectors. Look at the "Sector ETF Analysis Weekly" tab.

Another theme is that VOE (MidCap Value), VTV (LargeCap Value) and SDOG (value stocks in S&P500) are all showing good price pattern. As David Ryan mentioned in his post that value stocks have shown two strong days in a row. This is borne out by Growth vs Value chart as well. The blue line has started to point down showing value stocks outperformed growth stocks last week.

A quick note on today's market action:
Following the election, the market has been all over the map.  Dropping 750 points overnight as the election results were coming in and then rallying over 350 points from the low Wednesday morning! Today, the Dow continued to rally while the NASDQ was down.  Many sectors were effected by the speculation of what a Trump Administration would do.  The volatility will probably continue for a few more days.  I would concentrate on stock selection and especially in the model list of stocks with high ratings.  There should be a few of these that emerge as leaders.  Also keep an eye on the Growth vs Value Chart because the value stocks have had two strong days in a row.

current market state is filled with fear

The current market state is filled with fear. The VIX index is at 22.5, a high value. One way to take advantage of this is to buy long term put option on VXX. After the election as the fear subsides VXX should fall. Again there are no guarantees. For any trade including this one you should have an exit plan if the trade does not work in your favor.

Sell signal for the growth stock index this week

We are finding that the current market environment is not favoring growth stocks. We got a sell signal for the growth stock index this week. Even though SPY is QQQ are showing long term buy signal it would be a good idea to pare down holdings of your growth portfolio and raise some cash.

The pages using 10/28/2016 data have been updated. Click on the tabs to view the results.

Smart Beta Index using the Final Grade factor

Historical performance of stocks with Final Grade factor of 9.5 or higher is plotted on “Model List of Growth Stock Ideas” tab. Its performance is compared to SPDR S&P 500 ETF Trust (Ticker: SPY). 

This performance chart will be updated every week.

The chart is showing extremely good performance which indicates that the Final grade factor is very good at filtering good growth stocks.

This creates a Smart Beta Index using the Final Grade factor.

A new page has been added to the web site called “Summation Index”

The weekly pages have been updated. Click on the tabs to see the latest information. A new page has been added to the web site called “Summation Index”. Summation Index was created by Sherman McLean and represents the daily advancing and declining stocks on the NYSE.

Prices for both the medium term and short term are extended

Even though we have a buy in the long term signal, and also a buy in medium term, prices for both the medium term and short term is extended. This is reflected in the numbers where 70% of the stock are above their 200 day moving average and 40% of the stocks are above their 50 day moving average. Once these numbers come down and the long term buy signal is still intact, that would be a time to add money to your portfolio.

Long term BUY signal on all major Market indexes

We have a long term BUY signal on all major market indexes.  This information is displayed on the left side bar under “Long Term Signals”.

The site has been enhanced further with two new tabs added.

1.      “Growth Stock ideas to look at updated 9/30/2016”. This tab is updated weekly and gives a list of Growth Stocks worth liking into.

2.     “Check your Stock Grades”. With this tab you can check the grades of the stock by entering the ticker symbol. 

Current Market Action.

Current market action.

The good news is that we may get a buy signal on a long term basis soon. We need to wait and watch the price action next week before we confirm this. For the medium term the stock market may kick in to a sell mode. And on a short term basis it is advisable to take profit, since on a short term basis we are reaching an extended territory.

The medium and short term market signal information is displayed on the left side bar under “Market Trend”.

To see which sectors are working in the current environment click on the tab “Sector ETF Analysis Weekly 9/23/2016” at the top.

Also see the chart under “Growth vs Value Chart Updated Weekly 9/23/16” tab to see if you need to change your allocation between growth and value.

These two items are updated every week, so do check them every week even if there is no new blog.

Buying Opportunity

Today’s market action is a buying opportunity.

Start adding to stocks or SPY from you cash holdings. Do not move all your cash to stocks in one day. Keep on adding 5% of you cash position to stocks every time the market goes down.
The probability of the market going higher in the next few weeks is very good. Investing in the market works in probabilities. There is no sure thing for short to medium term trading.

The market has been going sideways for the last few weeks in a very tight range. It did look extended but with Friday’s (9/9/2016) price action we started to wait for the short term signal to give a buying opportunity (become less extended) before buying. Starting today we believe that opportunity has started.

As we have been saying the price chart of S&P500 index shows the medium and short term signal on the market is a buy but the long term signal on the market is still a sell. This information is displayed on the left side bar under “Market Trend”.

Analysis of today's Market action

Today’s action should give us a buying opportunity with a week or two.

The market has been going sideways for the last few weeks in a very tight range. It did look extended but with today’s price action we need to watch if we will get a buying opportunity in a week or so. Wait for the short term signal to give a buying opportunity (become less extended) before buying. It is not there today but the process of reaching a short term buying opportunity has started.

As we have been saying the price chart of S&P500 index shows the medium and short term signal on the market is a buy but the long term signal on the market is still a sell. This information is displayed on the left side bar under “Market Trend”.

“Sector ETF Analysis" and “Growth vs Value Chart" updated

To see which sectors are working in the current environment click on the tab “Sector ETF Analysis Weekly 9/2/2016” at the top.

Also see the chart under “Growth vs Value Chart Updated Weekly 9/2/16” tab to see if you need to change your allocation between growth and value.

These two items are updated every week, so do check them every week even if there is no new blog.

Current stock and bond market conditions

Current market conditions show a lower global long-term growth and lower fixed income yields relative to historical norms. This should translate into a more challenging investment environment. Stocks will have a relatively high valuation and bonds will offer limited income.

How should investors allocate their portfolios in this kind of environment?

Our opinion is that investors shouldn’t let the current conditions dictate their long-term portfolio strategies. The long-term return expectations are muted but positive and patience with a broadly diversified portfolio is likely to be rewarded over the next decade with fair inflation-adjusted returns.

Looking at the price chart of S&P500 index the medium and short term signal on the market is a buy but the long term signal on the market is still a sell. This information is displayed on the left side bar under “Market Trend”.

The market is going sideways for the last few weeks in a very tight range. It does look extended so this would not be a time to add more money to stocks. Wait for the short term signal to give a buying opportunity (become less extended) before buying.

As always since the long term signal is a sell, be prudent with 70% invested and 30% in cash.

To see which sectors are working in the current environment click on the tab “Sector ETF Analysis Weekly 8/26/2016” at the top.

Also see the chart under “Growth vs Value Chart Updated Weekly 8/26/16” tab to see if you need to change your allocation between growth and value.

These two items are updated every week, so do check them every week even if there is no new blog.

Sector Leaders

These sector ETFs are showing strength in the current market environment.

Rank	Symbol	Sector ETF
	Strong Sectors
1	SDOG	Value
2	MTUM	BlackRock Momentum
3	VDC	Consumer Staples
		Works in Late Cycle to Recession
4	GLD	Gold
5	VGT	Information Technology
		Works in Early to Mid Cycle
6	VNQ	REITS
7	SMH	Semiconductors
		Works in Early to Mid Cycle
8	SLV	Silver
9	TLT	Long term bonds
10	VPU	Utilities
		Works in Late Cycle to Recession
11	VOX	Telecom
		Works in Recession
12	VDE	Energy
		Works in Late Cycle
	Upcoming Sectors
13	SPY	SP500
14	RSP	SP500 Eql Wt
15	VIS	Industrial
		Works in Early Cycle
16	VTV	Large cap Value
17	VOE	Mid Cap Value
18	VUG	Large Cap growth
19	QQQ	Growth
20	VFH	Financials
		Works in Early Cycle
21	IWM	Small Cap
22	VSS	FTSE all world ex US

Current Market Action

The medium and short term signal on the market is a buy but the long term signal on the market is still a sell. This information is displayed on the left side bar under “Market Trend”.

The market is going sideways for the last few weeks in a very tight range. It does look extended so this would not be a time to add more money to stocks. Wait for the short term signal to give a buy opportunity (become less extended) before buying.

As always since the long term signal is sell be prudent with 70% invested and 30% in cash.

To see which sectors are working in the current environment click on the tab “Sector ETF Analysis 8/5/2016” at the top.

Also see the chart under “Growth vs Value Chart Updated 8/5/16” tab to see if you need to change your allocation between growth and value.

These two items are updated every week, so do check them every week even if there is no new blog.

Strategies working in the current market environment

These are the sector ETFs which are showing strength in the current market environment.

Rank	Symbol	Sector ETF
	Strong Sectors
1	SDOG	Value
2	VDC	Consumer Staples
3	VOX	Telecom
4	VPU	Utilities
5	MTUM	BlackRock Momentum
6	VNQ	REITS
7	VGT	Information Technology
8	TLT	Long term bonds
9	GLD	Gold
10	SLV	Silver
	Upcoming Sectors
11	SPY	SP500
12	VTV	Large cap Value
13	VIS	Industrial
14	RSP	SP500 Eql Wt
15	VOE	Mid Cap Value
16	QQQ	Growth
17	VUG	Large Cap growth
18	VCR	Discresinary
19	VOT	Mid Cap Growth
20	VHT	Health
21	IWM	Small Cap

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The Growth vs Value chart has also been updated. That chart shows that even though value style is still working, growth investing style is starting to work too. The same trend of growth style starting to work is also shown in sector analysis. Time to start adding money to growth strategies.

Sector Analysis in the current market environment

These are the sectors which are showing strength in the current market environment.

Rank	Symbol	Sector ETF
	Strong Sectors
1	VDC	Consumer Staples
2	SDOG	Value
3	VOX	Telecom
4	VPU	Utilities
5	MTUM	BlackRock Momentum
6	VNQ	REITS
7	GLD	Gold
8	TLT	Long term bonds
9	SLV	Silver
	Upcoming Sectors
10	VIS	Industrial
11	SPY	SP500
12	VTV	Large cap Value
13	VGT	Information Technology
14	VUG	Large Cap growth
15	VHT	Health
16	VOT	Mid Cap Growth

Current state of the Market

The medium term signal on the market is a buy but the long term signal on the market is still a sell. This information is displayed on the left side bar.

The short term signal on the market is also a buy but the market looks extended. So this would not be a time to add more money to stocks. Wait for the short term signal to give a buy opportunity (become less extended) before buying.

As always since the long term signal is a sell be prudent with 70% invested and 30% cash.

The Growth vs Value chart has been updated as of 7/8/2016

Check the Growth vs Value chart, it has been updated as of 7/8/2016. You can go to it from the top menu item "Charts Updated 7/8/16".

The Growth vs Value chart has been updated as of 6/17/2016

Check the Growth vs Value chart, it has been updated as of 6/17/2016. You can go to it from the top menu item "Charts Updated 6/17/2016".

Pressure on SPY and QQQ in the short term may give us a buying opportunity

There is a downside pressure on SPY and QQQ in the short term. This may give us a short term buying opportunity soon. As always we have to wait and watch for the right moment to buy. Looking at the long term, we still have a sell signal on SPY.

When the long term is signaling a sell and short to medium term is giving a buying opportunity, we should commit only a certain percentage (say 40%) of our portfolio to the trade.

Growth and Value

When the blue line is going up, growth stocks are working. When it is going down value stocks are working.

Re-balance your portfolio when the green line goes above 50 and then goes below it.

Or when the green line goes below -50 and then goes above -30. There is an orange line at -30 to show the transition. The +50 and -50 on the green line are extreme zones indicating a transition. No need to rebalance if the difference between the position weights from the desired weight is less than 1%. This will reduce unnecessary transactions.

Benefits of combining growth and value strategies:
From a quantitative point of view, growth (momentum) and value are negatively correlated. Clifford Asness et al. found value to have a -0.4 correlation with growth (momentum). A correlation of -0.4 means that when growth zigs, value has a tendency to zag. Owing to this lack of correlation, combining growth with value results in diversification benefits. This can reduce both volatility and turnover compared to a pure growth or value portfolio. It is more important to incorporate growth and value strategies rather than seek the exact optimal mix. While growth and value are negatively correlated, during a bear market both portfolios fall.

Standard and Poor Sector Analysis May 2016

Analysis of S&P Sector ETFs. This should show us which sectors are strong and which ones are weak.

Symbol	Name	Short to medium term price analysis
xly	Cyclical	Showing upward strength. Looks O.K.
xlk	Technology	Upward momentun starting. Time to start getting in for medium term timeframe.
xli	Industrial	Not ready with upward momentum. Wait and watch. Do not add new money.
xlb	Material	Loosing some upward strength. Still O.K.. Do not add new money.
xle	Energy	Not ready with upward momentum. Wait and watch. Do not add new money.
xlp	Consumer Staples	Reversed course. Loosing some upward strength. Take money out.
xlv	Health	Loosing some upward strength. Still O.K..
xlu	Utilities	Loosing some upward strength.Take money out.
xlf	Financial	Upward momentum still O.K.

Combining Growth and Value strategies

When the blue line is going up, growth stocks are working. When it is going down value stocks are working.

Re-balance your portfolio when the green line goes above 50 and then goes below it.

Or when the green line goes below -50 and then goes above -30. There is an orange line at -30 to show the transition. The +50 and -50 on the green line are extreme zones indicating a transition. No need to rebalance if the difference between the position weights from the desired weight is less than 1%. This will reduce unnecessary transactions.

From a quantitative point of view, growth (momentum) and value are negatively correlated. Clifford Asness et al. found value to have a -0.4 correlation with growth (momentum). A correlation of -0.4 means that when growth zigs, value has a tendency to zag. Owing to this lack of correlation, combining growth with value results in diversification benefits. This can reduce both volatility and turnover compared to a pure growth or value portfolio. It is more important to incorporate growth and value strategies rather than seek the exact optimal mix. While growth and value are negatively correlated, during a bear market both portfolios fall.

downside pressure on SPY and QQQ in the short term

There is a downside pressure on SPY and QQQ in the short term. This may give us a buying opportunity soon. The price action look more like a counter trend to the medium term uptrend. But as always we have to wait and watch for the right moment to buy. Looking at the long term, we still have a sell signal on SPY.

When the long term is sell and short to medium term is giving a buying opportunity, we should commit only a certain percentage (say 40%) of our portfolio to the trade.

Sector Analysis

Analysis showing which S&P sector ETFs are performing and which are not.

Symbol	Name	Short to medium term price analysis
xly	Cyclical	Upward momentum still O.K.
xlk	Technology	Price coming of a short term bottom. Price action does not look very strong. Should take some profit (sell some).
xli	Industrial	Loosing some upward strength. Still O.K.. Do not add new money.
xlb	Material	Loosing some upward strength. Still O.K.. Do not add new money.
xle	Energy	Loosing some upward strength. Still O.K.. Do not add new money.
xlp	Consumer Staples	Upward momentum strong. Turned up after 4/29/16.
xlv	Health	Loosing some upward strength. Still O.K..
xlu	Utilities	Weak upward momentum. Price moving sideways.
xlf	Financial	Upward momentum still O.K.

QQQ underperforming SPY

Stating the obvious that QQQ (representing growth stocks) is weaker than SPY (representing all sectors of the market). The sectors which are working are Utilities, Dividend paying stocks and REITS. These sectors are represented in SPY and not in QQQ. That is why SPY is doing better than QQQ.

The growth sectors in SPY are pulling it down while the dividend paying sectors are pushing it up. This indicates that it should remain in a sideways consolidation pattern, till some event changes that pattern. QQQ will keep on underperforming SPY, till we get some good growth in the economy.

Sector Analysis

Analysis showing which S&P sector ETFs are performing and which are not.

Symbol	Name	Short to medium term price analysis
xly	Cyclical	Showing upward strength. Looks O.K
xlk	Technology	Price action getting ready for a short term bottom.
xli	Industrial	Showing upward strength. Looks O.K
xlb	Material	Showing upward strength. Looks O.K
xle	Energy	Upward momentum strong. Maybe temporarily extended.
xlp	Consumer Staples	Price action bad. Loosing upward momentum.
xlv	Health	Upward momentum strong. Setting up for a short term bottom.
xlu	Utilities	Price action bad. Loosing upward momentum.
xlf	Financial	Upward momentum strong. Setting up for a short term bottom.

Growth vs Value Re-Balance

gazingstocks; growth vs value; growth; value

When the blue line is going up, growth stocks are working. When it is going down value stocks are working.

Re-balance your portfolio when the green line goes above 50 and then goes below it.

Or when the green line goes below -50 and then goes above -30. There is an orange line at -30 to show the transition. The +50 and -50 on the green line are extreme zones indicating a transition. No need to re-balance if the difference between the position weights from the desired weight is less than 1%. This will reduce unnecessary transactions.

This chart will be published weekly on the "charts" tab. The reader can use this to decide if they want to re-balance their portfolio between growth and value holdings. Rather than re-balancing based on an arbitrary time cycle, this method should give more precision in re-balancing the portfolio.

Note: If you are unable to see the chart on IE, you need to view the site on google chrome, Safari or Firefox.

S&P500 Index forming a 9 month base

On a short and medium term the market is in an uptrend. On a long term time frame the S&P500 index is forming a 9 month base. If it breaks out of the base it will indicate an uptrend in the long term also. S&P500 (SPY) is showing more strength than the Nasdaq Index (QQQ). This is because the energy stocks which are part of the S&P500 index have moved up in the last few weeks. There are no energy stocks in the QQQ ETF.

How should an investor allocate their assets in the current environment?

A prudent approach is to put 70% of the assets in stock ETFs (value and growth) and 30% in cash. On a short to medium time frame the market does look extended, that is the reason to have some cash in hand. The earning season is also starting and depending on how the company earnings come out, will guide us on what to do with the cash component of the assets.

Market Outlook

Long Term trend on the stock Market is not up.

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Buy Signals:

QQQ on 8/3/2012

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Sell Signals:

SPY on 1/29/2016

DIA on 1/29/2016

IWM on 9/30/2015

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