Stock Market Update (9/18/15)

It has been a long time since we posted.  Our stock signals have mostly remained steadily long during the stock markets's rise over the past year-plus.

Recent volatility due to "China worries" and the "FED interest rate watch" have increased volatility and led to several relatively sharp declines.  Although there have been several sharp moves downward, investors should note that the S&P 500 is only about -5% to -7% off of recent peaks.  In addition, stocks are 15% to 20% higher than they were two years ago.

Still, based on recent market action, here are our stock market indicators:

• Long-Term Indicators are currently neutral, and are looking towards market action for a potential change in signal.
• Intermediate-term models are currently mildly short; the market seems overbought. 
• Short-term indicators follow the current trend and are too short-term to report regularly.  

It is noteworthy that other markets we trade - such as currencies and commodities - helped to cushion the decline in the equity markets the past few months.  

Good luck!  

Intermediate-Term Stock Market Indicators FINALLY Long

It has been quite a while that our stock market indicators have gone long, and our results suffered accordingly.

The stock market closed today at 1920.  Our last update was 11 months ago.

• Happily, our long-term indicators kept us generally long (to flat or slightly long) in the stock market since they remained strongly bullish during the run-up.  
• Currently, the long-term indicators are moderately bullish.  The long-term indicator has its "foot off of the gas" due to the recent sell-off. 
• Our medium term oversold indicators are now fully long.  These indicators had been predicting a sell-off incorrectly for several months, keeping us from being fully long in the stock market.  

Over the long-term, we have a good record managing the ebbs and flows of the stock market.  This recent under-weighting of equities brings us back closer to the pack in terms of market-timing, but we have outperformed most.

Caution on Stocks 9/9/13 at 4:45 PM

Our stock market indicators are flashing a warning signal so investors and traders should take note and be careful.  Our last stock market signal was on June 6, 2013, when our indicators were bullish.  At the time, the S&P stood at 1609.  The S&P is currently at 1672.

• Long-term indicators are bullish.
• Intermediate-term indicators are moderately bearish.
• Overall, we remain slightly bullish, but we will be watching the short-term trends and indicators.

Investors should be cautious and should look for sell-offs to add to equity positions.  Traders may look to the short side if the market accelerates to the downside.  It is often difficult to predict turning points, but our intermediate-term model has had a good track record as documented by our blog.  

As always, we will keep readers apprised of changes to our stock market indicators.  

Stock Signals: Back on the Gas Pedal 6/6/13, 6AM

As of the close yesterday, our overbought/oversold indicators have flipped from a bearish to a bullish stance.    Our last signal change was on May 9, 2013, when our overbought indicators turned bearish.  At the time, the S&P was at 1627.  As of the close yesterday, the S&P stood at 1609.

For a while, this system's signal (and trade) was looking bad, with the S&P breaching the 1650 level, but some of the air has been let out of the bubble.  This model is now bullish.  Here is a rundown of the current technical trends in the U.S. stock markets:

• Long-term indicators are bullish
• Intermediate term overbought/oversold are bullish
• Short-Term currently bearish, but this changes in the short-term.  

Our tactical asset allocation models, which apply these approaches to various asset classes, have performed well.  

Past performance is not necessarily indicative of future performance.  

Reiterate Overbought Stock Signal 5/24/13

Two weeks ago, our stock market overbought / oversold indicator flashed a bearish signal.  At the time, the S&P 500 was 1627.  Today, the S&P closed at 1649.60, so this signal has been a loser, to date.  Over the years, the overbought / oversold model has been a good performer, but at some point, good systems will "throw in the towel" and cut their losses (-- and get back on the main trend).

• Currently, the Overbought stock signal is still bearish.    
• The long-term indicator remains bullish.
• The short-term trend is up.  
• Thus, our positions have been dictated by our short-term model.  

Note that the overbought indicator looks like it may flip to neutral to slightly bullish soon, so visit our blog regularly (or connect to our twitter).  

Happy Memorial Day weekend.  

Quick Blog Post: Stock Signals turn neutral to bearish (5/9/13 - 3:45pm ET)

S&P is currently at 1627.

More later.

In particular:

• Overbought indicators are bearish.  
• Long-term signal remains positive
• Short-term indicators will dictate our positions (were bearish near the close).  

Stock Systems Go Long 2/25 (8:30 am)

Our stock systems are now long, with some of the air let our of the recent rise in the stock market.  The stock market has seen a strong run since the depths of the financial crisis (2008/09) -- and also since the middle of 2011 and last summer.  The market seems just a touch overbought, but our systems don't want to "fight the tape" any more on this short-to intermediate-term cycle.  Although many are still struggling with this difficult economy, there are finally scattered signs of recovery.

Our last signal was on January 3,. 2013, when our overall stock signals went flat -- based on the intermediate-term overbought models going slightly bearish. At the time, the S&P stood at 1457, and with Friday's close at 1515.60, this signal was a slight loss.  Currently, our models are:

• Long-term: bullish
• Intermediate-term: bullish
• Short-term: changeable, but currently bullish.  

Stock Systems: Re-Iterate Long Trading Signals 12/4/12

We have not needed to update our stock trading signals because the signals have mainly remained the same. Our last signal update was on October 11, when the S&P stood at 1438.   The S&P closed yesterday at 1410.  Our stock market signals remain:

• Long-term models remain bullish.
• Intermediate-term (Overbought / oversold) models remain moderately bullish.
• Short-term trends continue to dictate our stock positions.  

Since October, the stock market has been fairly volatile, dropping from the 1460 level down to 1350, before  rebounding to the 1410 level.  

• Long-term investors should look to add to positions on stock declines.  
• (E-mini) S&P traders should look to be long, based on our long-term (bullish) and intermediate-term (moderately bullish) signals.  

Stock System Update: Long at 12 noon (10/11/12)

Our stock market systems are going from neutral to moderately bullish.  Our last stock system update flashed a warning on September 10, 2012 -- and went neutral when the S&P stood at 1433.  Currently, the S&P stands at 1438, so it was a fairly successful signal.

http://z-trader.blogspot.com/2012/09/stock-systems-flash-caution-330pm-91012.html

• Our long-term models remain bullish.
• Our overbought/oversold models are moving to moderately bullish.  
• As usual, short-term trends should help dictate your trading positions and risk management.  

Improving Investment Decisions with Quant Analysis

Below are some excerpts on a SeekingAlpha article -- that highlights "the application of quant analyses to produce meaningful and objective investment information."  

With so much at stake in the finance and investment world, there are constant debates about investment performance, asset allocation, active vs. passive approaches, and more. In this article, we review recent articles on the application of quantitative models to the investment world - and look at the stock market's technical outlook.

History can tell us where we have been -- and a scientific and mathematical approach can help guide our investment decisions going forward. Quantitative analytics can be applied to many areas within finance, ranging from asset allocation and risk management to trading / investment strategies and the growing interest in alternative assets.

Quantitative approaches can be used to improve investment decisions by producing objective analysis. The goal is to improve investment results and the probability of repeatability. Math and scientific methods can help put history and patterns on our side. Here are some important takeaways:

• Varied interests and motivations can reduce optimal investment decisions.
• Performance data is not necessarily useful in predicting future results, especially when studying short-term manager performance.
• Behavioral finance has shown that many investors overreact to recent events, and tend to ignore long-term historical patterns.
• Mathematical models can minimize the negative impacts of greed and fear, improving discipline -- and taking emotion out of the equation.
• Robust quantitative analysis can improve "forward information" and repeatability.

Systematic and scientific approaches can yield meaningful information and help improve long-term performance by providing objective analysis to investment committees.

Read more here:

http://seekingalpha.com/article/879811-improving-investment-decisions-with-quantitative-analysis

Stock Systems: Flash Caution 3:30pm 9/10/12

Quick blog post for now; more later.

Our stock market models are currently overall neutral after riding the stock market to recent highs.

• Our long-term models remain bullish.
• However, our overbought/oversold models are bearish.
• In addition, the short-term trend is down.  

More later, but wanted to get this info out.  The S&P is currently at 1433.

Stock Market Systems: Reiterate Buy (8/17/12)

It's been a while since our last update from our Stock Market Systems on July 12, 2012 -- so we wanted to re-iterate our systems' Buy signals.  As our readers know, we update the blog whenever there is a change to our main stock market signals (Long-Term or Intermediate-Term Models).  In this case, our signals remain the same -- but we just wanted to check in and re-iterate the Buy signals.

On July 12, the S&P stood at 1336.8.  Our models kept us generally long -- and today, the S&P closed at 1415.5, reaching recent highs.  Our models remain long -- and we will make a blog post on a material change to our models' signals.

In the futures markets, after gains over the last few months, several markets have been in a consolidation phase (such as currencies, precious metals).  Grains have been choppy, although generally higher due to this year's drought.

Stock Market Systems: Full Steam Ahead (7/12/12)

Our stock market indicators just switched to:  all bullish.  This is a change from our last update of almost a month ago, on June 16th, when our overbought / oversold indicators flashed a "pause" signal when the S&P stood at around 1343.

Since the last update on June 16th, the stock market has been churning and has been fairly volatile (in a range of about 1313-1370), but is relatively unchanged over the entire time period -- and currently stands at 1336.8.  Here is a look at our stock indicators:

• Our long-term model remains strongly bullish.
• Our intermediate overbought / oversold indicators are strongly bullish as well. 
• Our short-term models reflect short-term movements, so we do not typically list the current signal.  

Traders -- including stock index futures traders -- may want to be long in the stock indices.  Long-term investors with an over-allocation to cash may want to put some of that cash to work.  

Stock Market Systems: On Hold + Notes on Greece (6/16/12)

With the stock market's recent rise, our intermediate-term (overbought / oversold) stock market indicators have turned slightly bearish near the close on Friday.  We last posted a stock market indicator update on May 21, 2012, when the S&P stood at 1308.  The S&P closed on Friday at 1342.84.

• Based on market action, our intermediate models are slightly bearish.
• Our long-term model is bullish.  
• Net-net, that leaves us slightly bullish.  As usual, short-term market action and models also dictate our market positions.  

In addition, with the financial markets bracing for volatility -- based on the Greek elections on Sunday -- we took this as a welcome reprieve to be flat in markets (that are highly correlated to the situation, such as currencies and equity markets).  

CNBC.com had a nice summary of the Greece elections on Sunday.  For entire article, please click here:

http://www.cnbc.com/id/47824801/

Greece may be a small country, but its vote this Sunday may be the most important in the world this year.

PNC | Brand X Pictures | Getty Images

While the June 17 election is not directly billed as a referendum on Greece paying its debts and staying in the euro, its might as well be. If no party wins enough votes to form a coalition, as with the last vote, then the Greek situation may very well remain as it is now – a jumbled mess of no real leadership, no real plan and perhaps no real way to stay a member of the euro zone economic family.

Though seemingly complicated, this Greek drama is actually quite simple. In a nutshell:

• Greece could run out of cash to pay its bills by the end of this month, thus...
• Greece needs a bailout, however...
• Greece likely can't get a bailout without agreeing to tough economic oversight (aka "austerity"), and...
• Greece can't agree to anything without a majority coalition government, but...
• Greece doesn't have a majority coalition government, thus...
• Greece needs a majority coalition that wields the necessary power to push an austerity/bailout plan through.

Stock Market Oversold 5/21/12

With the stock market's drop from around 1400 at the beginning of May to the current levels around 1308, our oversold models are now bullish.  That decline represents a drop of some -7%.   What do our trading models say now?

• Our intermediate-term oversold models are now strongly bullish.  Traders may want to trade a potential bounce upwards.
• Our long-term models remain bullish -- but are slightly cautious, wary of potential downdrafts.

Our last stock market signal update was on May 2, 2012, when the S&P stood at 1406.  The S&P is at 1308 at the time of writing this.  

Stock Signal Update (4/24/12)

The recent stock market decline let some of the air out of the stock market's steady rise over the past several months.  Our stock market indicators switched to positive with the stock market currently trading at about 1371.

• Our long-term model are now bullish.
• Our oversold/overbought models are also bullish, after the recent downdraft.  

Our last update was in December, when the S&P stood at 1254.  Since that time, our models unfortunately had us underweighted in the stock market.  Systematic trading strategies are not always correct, but following disciplined methodologies helps in terms of repeatability, managing risk, and managing emotions.  

Stock System Indicators: Turn Bearish 12/7/11 11:35am (ET)

Our stock market indicators have turned bearish, with the S&P currently at 1254.  Our last update to our stock market systems was on November 23, 2011, when the S&P 500 stood at 1167.  Stocks have had a nice run-up -- and our intermediate-term overbought indicators, in particular, have flipped to bearish.

• Our long-term indicators remain bearish but have ticked up to "slightly bearish" from its bearish stance on 11/23/11.  
• Our intermediate indicators have flipped to moderately bearish from its moderately bullish stance two weeks ago.

What Works on Wall Street

One of our favorite websites, CXO Advisory, had a nice summary of O'Shaughnessy's Book.

From Chapter 21, “Using Multifactor Models to Improve Performance” (Page 470): “…you can do vastly better than a passive investment…by using more than one factor to select a portfolio of stocks. …Investors are best served by buying stocks that have jumped a series of hurdles rather than just one.”

From Chapter 24, “Sector Analysis” (Page 545): “…what works in the All Stocks universe also works quite well at the sector level. …what we should avoid investing in at the All Stocks universe level should also be avoided at the sector level.”

From Chapter 25, “Searching for the Ideal Growth Strategy” (Page 567): “One of the very best ways to use price momentum is to marry it to a value constraint [composited value factors]. …six-month price appreciation is a more effective final momentum filter than 12-month price appreciation.”

While the author takes steps to mitigate data snooping bias, there are so many characteristics/combinations tested on the same data sets in search of best portfolio strategies that discrimination among strategies/variations may derive materially from luck.

http://www.cxoadvisory.com/17768/fundamental-valuation/a-few-notes-on-what-works-on-wall-street/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+cxo+%28CXO+Advisory+Blog+-+Investing+Notes%29

Battle of the Stock Market Indicators 11/23/11

We haven't posted about our stock market indicators since October 13, 2011, because our indicators have stayed relatively constant.  On October 13th, the S&P stood at 1195 (when both our long-term and intermediate-term models were slightly bearish).  Currently, the S&P stands at 1167.  Here is an update on our stock market indicators:

• Our long-term model is currently bearish (more bearish than the slightly bearish stance on 10/13).  
• Our intermediate-term indicators are moderately bullish (from the slightly bearish stance on 10/13).  

Our key models have offsetting signals, so that stock positions will be dictated by the short-term movements in the stock market.  Long-term investors should be watching key levels of stock market technical support -- and/or adding to positions on market weakness.  Traders should be wary of the short-term trends in the markets.  

Happy Thanksgiving!

Stock Market Indicators 10/13/11 10am (ET)

After the oversold stock market rebounded (about 12% from the recent lows!), our indicators have changed a bit since our last stock update on 9/27/11, when the S&P was at 1145.  Currently, the S&P is at 1195.

• Our long-term model is still bearish, but gives only a "slightly bearish" signal.
• Our intermediate-term (overbought) model has changed from neutral to "slightly bearish."
• Our short-term indicators are dependent on shorter-term market action, but are currently bearish.

Traders may be interested in the short-side of the stock market, but note that the indicators are just slightly bearish.  However, they are bearishly aligned.  Long-term investors may want to wait and add to positions on weakness.