Saturday, June 15, 2013

T6 Bullish Model Update...Part 2...6.15.13

These are the updated results for the T6 Bull Model using a top 1 sort:
Depending on the timeframe in focus, one or two years, a top 1 or top 2 sort deliver a marginal edge over one another.

What's interesting is that XLU has a downslope RSQ and while the remaining 5 components have upslope RSQs the P6 is distinctly negative.
The best looking P6 slope charts include XLV and SPY although the XLU P6 line has switched to positive in the last 3 days.  As mentioned previously in situations where P6 is below the RSQ and dowmslope we have to be especially cautious that an apparent rally doesn't turn into a "trap door" and a sudden plunge to new lows.
Here are the component charts displaying the RSQ and P6 nuances described above:
And here's another way of looking at the current situation using the P3 and P6 overlay:

That's XLF, the financials, at the bottom on the chart set...displaying an almost straight line appeciation over the past 2 years

The other 5 components, including SPY,  are now all sitting dead on the RSQ stop, which just happens to coincide with the 50 day moving average (not shown).

What's next?
As expected, there are divergent opinions.
The largest retail account broker in the US remains selectively bullish on the markets and expects a positive bounce off the RSQ line,  a pattern which has repeated multiple times in the past 6 months.
On the other hand, a  billion dollar bond manager (with whom I share ideas) with a stellar track record (can't mention his name) advised clients on Friday to assume protective cash positions.
Of note is that he didn't say "buy bonds", he said "take your profits now".
He also mentioned that he fully expects more volatility in coming weeks with 100 point + or - days more common than in the past few months. 
Buckle up.
Next week we'll talk about the implications of the VIX (volatility index).