Stock Lists and charts have been updated for 11/3/2017

The Stock Lists and Charts are updated every week even though a notification may not be posted.

Stock Lists and charts have been updated for 9/22/2017

Stock Lists and charts have been updated for 8/25/2017

Stock Lists and charts have been updated for 8/11/2017

The sector list is indicating the non-US Markets are performing better than U.S. Markets.

In the U.S. market small cap stocks (IWM) are in trouble. The U.S. Mid-Cap index (MDY) is not showing an uptrend.

See the Sector ETF page for more insight in how the sectors are performing.

Stock Lists and charts have been updated for 8/4/2017

Stock Lists and charts have been updated for 7/28/2017

Current state of the model list

The model list has been underperforming the S&P500 index for a few weeks. The model list normally outperforms the S&P500 but there are periods when it also underperforms. The stocks in the model list are currently extended but since the list changes every week, it will start to pick up stocks which will outperform the S&P500 as the stock sectors rotate. It is not a good idea to go to cash during these periods of underperformance of the model list. The reason being that we (portfolio) could get whipsawed. The time to go into cash or short term bonds is when the Tactical signal indicates so. This signal is shown on the lift side under “Market Trend”.

Stock lists and charts have been updated for June 10, 2017.

Stock lists and charts have been updated for June 10, 2017.

The Summation Index is still close to 1000 and it is still above its moving average, indicating there is still a good chance for the market to keep on moving up in the short term. However the price action on Friday on QQQ puts us on notice to watch the Summation Index very carefully.

In Growth vs Value chart the line has been going up since Dec 2, indicating that growth is outperforming value. However last week the line turned down for the week, indicating that value did better last week than growth. By reversion to the mean theory the upward movement of growth stocks may slow down and value stocks may start moving up.
We may be at a point in the Market where the performance of growth stocks may slow down compared to value stocks. It is time to start watching the market closely to understand what it is telling us, then decide what action to take.

Stock lists and charts have been updated for May 13, 2017

Stock lists and charts have been updated for May 13, 2017.

The Oscillator of the Summation Index is still close to 1000 though it has gone below its moving average, indicating there is still a good chance for the market to keep on moving up in the short term. Since the oscillator is also low there there is a possibility for the market to go up, if the oscillator starts moving up.

In Growth vs Value chart the line has been going up since Dec 2, indicating that growth is still outperforming value. By reversion to the mean theory the upward movement of growth stocks may slow down and value stocks my start moving up. However the chart does not show we have reached that point.

Stock lists and charts have been updated for March 31, 2017.

Stock lists and charts have been updated for March 31, 2017.

The Oscillator of the Summation Index has reached 1000, indicating a good chance for the market to start moving up again in the short term. Since the oscillator is so high there may be a slight pullback before it starts moving up again.
In Growth vs Value chart the line has been going up since Dec 2, indicating that growth is still outperforming value.

Rotation Continues

Rotation Continues 2/22/2017
I don't have much to add from last month's post because not much has changed.  The market's uptrend continues despite just about everyone saying how overbought it has been.  Its continues to rotate from group to group.  It really hasn't picked up new groups to move higher, but it seems to be moving back and forth between banks, investment bankers, steels, semi conductor equipment and manufacturing.  If you have a shorter term time frame you have to move to the group that hasn't run in the last couple weeks. One area that seems to picking up is the emerging markets.  The relative strength of that index has been in an uptrend since the November.

Stock lists and charts have been updated for Feb 17, 2017.

Stock Lists and charts have been updated for Feb 17, 2017.

Growth has been doing better than Value, since Dec 2, 2016. This can be seen in the Growth vs value chart. Summation Index is above 1000 since Jan 9, 2017. Read the explanation on the “Summation Index” page to understand the significance of Summation Index being above 1000.

A rule based system for investing:

See the list of stocks in “Model List of Growth Stock Ideas”. Invest in that list with equal dollar amounts in each stock. Next month re-balance your portfolio and invest equal dollar amount in the new list shown on that tab. Even though the list on that tab is updated every week, the system proposed here is re-balancing every month.

The system is bases on two parts.

The first part mentioned above is based on the study of biggest past stock market winners. The philosophy here is that stocks generally sell for what they are worth. It prefers to focus on companies that are still in a stage of earnings acceleration.  The list of stocks in “Model List of Growth Stock Ideas” is based on this principal.

The system identifies companies with strong fundamentals— enjoying big earnings increases — and buying them when they emerge from price consolidation periods or when prices have started to respond to good fundamentals and show a strong upward price movement. This is before they have dramatically advanced in price.

The momentum factor for earnings combined with the momentum factor for prices have produced very good results as shown by the Index performance.

The drawback with this methodology is large drawdowns and high volatility. Upside volatility is a positive factor which produces exceptional upside returns.

To minimize the problems of drawdown and high downside volatility the system incorporates “Tactical Allocation”. This is the second part of this system.

In “Tactical Allocation” asset’s trend (Index trend) is compared to its own performance. If the absolute momentum of the Index is slowing down compared to 12 months ago switch to a mix of Short and Intermediate term bonds. When the Index momentum turns up again, switch back into the selected stocks.

Here’s what is good about the strategy:

1.   It’s rules-based. There’s no discretionary decisions required. The relative momentum rule for earnings and price picks “good” growth stocks. The “Tactical allocation” rule triggers switch between stocks and bonds based on which is performing.

2.   It’s a low activity strategy. The rules are only checked once a month for rebalancing purposes, which leads to a fairly low turnover compared to other momentum strategies. The rules for “Tactical allocation” are checked weekly.

3.   It’s based on both historical evidence and investor behavior.  The back-test makes sense as do the behavioral reasons for the momentum factors. All good investment strategies are based on taking advantage of other investor's behavior.

Now for some drawbacks and caveats:

1.       The psychology of going all-in or all-out. It is a simple strategy, but having any position in the markets is never easy. It can be very difficult to psychologically go from an all stock to an all bond position. Some investors simple cannot stomach following “Tactical Allocation” signals, no matter how simple they may be.

2.       Back-tests only tell you what has happened, not what will happen. This is true of all investment strategies, but it’s worth remembering that the future is promised to no one in the markets.

The verdict?

You have to know yourself as an investor when considering this type of strategy. It’s more about knowing yourself than understanding the strategy.

Even simple strategies are never easy to implement. This system has worked in the past, but investors have to define what “works” means to them. We say an investment strategy “works” if you’re to follow it over many different cycles. It never “works” if you bail out at the first sign of trouble or relative underperformance.

Summary:

The System is an approach to achieving risk-managed exposure to the anomaly across asset classes. It establishes meaningful controls over investment risk, once an asset's value begins to decline. It removes emotional and behavioral biases from the decision-making, while taking advantage of these same biases in others to achieve exceptional returns.

Stock Lists and charts have been updated for Jan 27, 2017.

Stock lists and charts have been updated for Jan 27, 2017.

Growth has been doing better than Value, since Dec 2, 2016. This can be seen in the Growth vs value chart. Summation Index is above 1000 since Jan 9, 2017. Read the explanation on the “Summation Index” page to understand the significance of Summation Index being above 1000.

David Ryan has written a very insightful blog (titles “Rotation”) on what is currently happening in the Stocks market. His blog is just below. Read it!

Rotation

January 24, 2017  Rotation

The market continues to rotate from group to group.  One day the financials are doing well as interest rates climb and the next they fall as interest rates also fall.  The FANG stocks, (Facebook, Amazon, Netflix and Google) were dramatically underperforming from the election in November until the end of the year and now they are midst of a strong move in January with Google and Amazon breaking into new highs.  It is tough to stay ahead of the rotation.  

The Summation Index can't get enough momentum to really get this market to break out and never gets enough negative days in a row to start a market correction.  So it is currently in a neutral mode.  As in most markets to get outperformance you have to be in the right groups and the rights stocks.  Check out the Sector ETF Analysis on this website to see what is working now.  Semiconductors, Financials, Industrials, Value and Technology are all leading at this time.  For individual names look to model list of stocks for the best names for possible buys.

      

We may soon get a buying opportunity

The number of stocks above their 50 day moving average has gone above 70% and the number of stocks above 200 day moving average is above 60%. These values indicate that the market, on a short term basis, is overbought. 

So at this point it is not a good idea to add more money to stocks. Wait for these values to come down before adding new money to stocks.

These indicators do not give an exact day when the market becomes overbought and will turn around. However these indicators do tell us to wait and watch till we get an opportunity to add new money to stocks. All this is short term, so any action should happen in days or weeks.

Long term the market is still in an uptrend.