M6 Model Updates...1.19.14

With SPY essentially flat for the first 20 days of the new year here's a look at how the Schwab, Small World and Vega models have fared:

On a 20 day basis the Schwab model is slightly outperforming SPY, mostly due to a focus on the Schwab housing and foreign stock ETFs (SCHH and SCHF).. The good news...no commissions.
The short term ALERT signaled CASH on the 16th.

This model slight;y underperformed SPY and has been focused on VGK...the Vanguard total Europe ETF...recently superceded by EWG (Germany).
The short term ALERT signaled CASH on the 16th.

Vega  has been the loser of the 3 models, having been in a downswoon since late December if a top 2 sort were used. I'm still analyzing exactly why the momentum and relative strength signals failed to produce a more favorable return but that;s a work in progress.

Had we used a top 6 sort the results look somewhat different but with the clarity of hindsight we can see that simply holding SPY would have achieved the same results..... so why bother?

Can we do better by simply applying strict risk management controls to a SPY position versus the diversified risk of a portfolio model?  That's the question M3 was designed to answer.

Volatility Seeks a Direction....1.16.14

A morning sell off was met with a late afternoon rally ...of sorts. Utilities really saw a bump today via the VEGA model and the day closed with SPY trending neutral.  Retail (XRT) reversed course from yesterday and plunged thanks to bad earnings from Best Buy and a couple other disappointments.

Note that SSO is the # 1 ranked slot and XIV has been cancelled as a trade...no doubt the bizaaro behavior of the VIX and XIV over the past 10 days.

Also note the SPY TrendX chart in the right side panel....still plenty of upside potential if the markets decide to go for it.

VIX XIV Weirdness Resumes....1.15.14

For most of the day both the VIX and its ETF inverse XIV were red....hypothetically an impossible situation.... but it happened.  meanwhile the DOW tacked on another 100 points and is likely to cross over the 16,500 line in the sand tomorrow.

Tech (QQQ) and the financials (XLF) considerably outperformed SPY today...you can see it clearly on the Vega model below.  I've previously talked about the bullish implications when QQQ and XLF are the momentum leaders and we're clearly in that mode now...can Dow 17,000 be far away?...it could happen in a week if things get rolling with some hot earnings.

 

 M3 continues to be bullish for SPY and QQQ.
FYI....today is the end of the M3 update special offer.

Reversal....1.14.14

Today's bullish action virtually erased yesterday's bearish plunge, with the NASDAQ closed at new highs. While the VIXEN closed modestly downslope the TrendX was above the zero line..which is positive.

Amazingly, the price of near term out of the money VIX call options was actually less at the close today than at Monday's open reflecting a 2 day flux of approximately 100%, while the VIX index itself went up 10% yesterday and down 10% today.
Did I mention to expect volatility this week?

We still have earnings looming and a number of new stock downgrades but the markets may be starting a push back up to DOW 16500 . In addition, the emerging markets ETFS...EEM and SCHE..showed robust momentum today and may be starting a much delayed move up

M3 has once again reversed itself and is now in a full bull mode.....to say that the past 2 days have been a whipsaw would be a real understatement.
.

VIX Returns to Normalcy....UP...1.13.14

I mentioned the odd behavior in the VIX last week...that all changed today with the VIX rising 10% and the markets plunging.  As we head into options expiration this Friday we may expect volatility to persist catalyzed by uncertainty at what upcoming earnings reports may reveal.
The markets are always climbing a wall of worry.....except when unbridled exuberance prevails.

M3 is clearly in cash as the TrendX showed a piddling recovery into the close.  The energy sector XLE really felt the pain today although the damage spread across all sectors....retail (XRT) was just plain dismal.

I'm expecting a bounce into Tuesday's open...whether it will hold is more than a little uncertain.

XLF Model Update...1.10.14

XLF (Financial SPDR sector ETF) has been on a tear lately as the robber barons have big plans for 2014 and potential windfalls from eased constraints so going into the new year seemed like a good time to review the model we profiled last year that was created in the spirit of the X sector model only in this case we just use XLF as the benchmark and use the top 10 XLF component stocks as the model inputs.

Note that the Yahoo symbol for Bershire has changed from BRK.B to BRK-B
Also note on the 2 year equity chart below that going to cash in late April of 2012 as the P6 turned down and then re-entering in August as the P6 went upslope would have produced an additional 10 % return.

Sideways Action Continues..1.9.14

The TrendX chart below tells the tale...down to sideways momentum with a closing in modest positive territory.  Also check the SPY daily TrendX in the right panel >>>>>>>>>>>
SPY is currently at the momentum/relative strength level from which it reversed in November. 
Adding to the confusion... XIV was actually green for part of the day although it didn't close that way, ultimately diverging from SPY momentum,  and M3 is now in a wait and see mode.

Certainly not a washout the past few days.... the NYAD advance/decline line has never fallen to the sub teen level that characterize true selling. Time for a rebound?

Oil (XLE) was the weak sector in the Vega model today while health care (XLV) showed strong relative strength and looks poised for new highs..