T6 Improves But Still Cashbound...6.28.13

It's the last day of the month, which is typically bullish, but we're not seeing a bullish push as we head into the last hour.  Yes we did recover from an opening NYAD of .6 to the current 1.3 but on the heels of yesterday's rally the mood is muted at best......except in gold (GLD) and the gold miners (GDX) which are showing a nice surge after plummeting for weeks on end. 

Bonds are also continuing with a recovery move although we need to see further evidence that momentum has shifted to the upside following the massive global selloff over the past 10 days.

On the T6 bull model XLU is continuing to show promising signs of improvement following some higher than usual daily volatility...likely not unqiue to XLU,  just a parallel to the high volatility that has characterized the markets overall.

Interestingly, with the market down 55 one hour before the close the VIX is down 2%....not a typical correlation.

Dudley Speaks..Market Reacts....6.27.13

William Dudley, head of the NY FED said the FED's asset purchase would be more aggressive than that suggested by Bernanke if economic growth and the labor market turn out weaker than expected.
The markets loved that as evidenced by to day's action on the NYAD...opened at 8.00 (wildly bullish) and is actually above that at 8.30 after a brief pullback and the DOW is back above 15,000.

The VIX is down a modest 4% and volume is thin, a likely sign that not everyone is convinced the rally has legs. The P6 and the RSQ are still indicating cash.

The X sectors have now pushed into the top slots in the market neutral model (live update shown) and what's of more interest is that both equities and bonds are back to moving in sync (both good and bad) as can be seen by viewing the TrendX charts of the SPY and TLT (20 year treasuries).

T11 View of Default Model..6.26.13

Following yesterday post on the NYAD we saw another pop up of the NYAD to 7.85 at today's open (wildly bullish)...which has been in a steady decline since the open and now stands at 2.87 at 2 hours in.

We're still refining the T11 Lab but here's the view of the baseline T2 default (market neutral) portfolio as of Wednesday morning.  The position of AGG is a bit surprising given the huge selloff in bonds last week that dribbled into Monday (and yesterday).  Nevertheless, when put in the context of the rest of the portfolio there is apparent positive momentum in AGG (I-Shares Total Bond Core).
As of this morning XLU is also showing a renewed sign of strength after a 15% decline that started May 1st.

The P6 and RSQ stop loss lines still have the model in cash BUT if you held on and not followed the discretionary money management guidelines the metric panel displays the resultant damage.
Once again.....when P6 is downslope, especially when it crosses over the RSQ (linear regression  line) the only value of the momentum rankings is that they slow the rate of loss if the portfolio is not converted to cash.

The Pesky Advance/Decline line...6.25.13

I've mentioned the NYAD (NYSE advance/decline line) several times.  It's a true real time (or longer term) indicator of the underlying market pulse.
Here's the view on 30 minute bars looking back 12 days.
Keep in mind that a reading of 1.0 means equal advancing versus declining issues.
The days highlighted with the yellow arrows started with basically no advancing issues (.05) and showed no improvement throughout the day.
Each of these days was followed by an optimistic open which quickly faded down...in some cases substantially.
Before we can expect a meaningful (and more risk tolerant) investment environment for our models we must see a return to a more normal and less volatile action on the NYAD throughout the day.  A week ago we forecast a significant increase and volatility and based on the behavior of the VIX (white overlay line) we can see that this has occurred and the VIX now stands (as of this post) at 19.15, down 7.5% for the day, but still well above the 12 values that accompanied the previous month's slow rise and churn.

Is the VIX due for a pullback? If so it will probably come in little steps and not without a few whipsaws.
Betting against the VIX is a risky bet for now.

The global sell off in bonds has been dramatic with treasuries and munis taking substantial hits.
Thank the FED for getting that ball rolling but the China slow down and other macro economic factors have created a kind of pig pile effect and its not clear where the first support line is...and more importantly...whether it will hold.

Many issues are now right back where they were on Jan 1st so this may be the foundation for another run up, BUT...cash is still the P6 signal. Yes, all the X sector ETFs are green as of 90 minutes in today but we've seen the "trap door" spring before so caution is advised.

T11 X Sector Update..6.24.13

Here's a look at the X sectors updates as of today's close using the beta version of the new real time T11.
This is a top 2 sort and on the shorter time frames we see that the model is marginally underperforming the SPY, while on the longer time frames the risk management shows favorably.

The model's current status is, with all the other Mosaic portfolios, not vested and in cash at this time.
While the RSQ is upslope the P6 is not giving us a positive reading at the present time.
The good news is that the markets cut the opening losses by almost half at the close.

The bad news is that there is still significant selling, which was particularly evident going into the close.
Another day, another wait and see recommendation.

Wait and See...6.22.13

We did get a little bounce on Friday but it's not clear that this will turn into a rally run. 
To confound the market's direction earnings season is beginning, which typically stimulates volatility as large traders seek to straddle the news with options positions and/or outright directional bets.

Of the 6 bullish components only XLU is downslope XLU and only XLV has a positive P6 slope...which is not a signal to be vested...just a suggestion as to XLV's relative strength.
HOWEVER,  on closer examination after checking with the Variable metrics panel it's apparent that XLV's strength is a trivial .07% relative to it next best performer (IWM) on a 5 day basis so the apparent strength is marginal at best and not significant.

At this point the T6 portfolio (along with all the T2 variations) remains in cash until technical signals improve.

Click once on chart panel to clarify and enlarge.

Trap Door Opens...6.20.13

We never got the actually P6 and RSQ cross and yesterday's reversal sell off was a big one.
Today is more of the same with the advance/decline line (NYAD) hovering between .04 and .05 (a value of 1 is equal advancers versus decliners, so there are basically no buyers.

The VIX is up 16 % so far today....a huge move and the bottom has fallen out of both bonds and gold as the FED suggests the market prop up program may be easing.

The "trap door" pattern discussed previously is evident everywhere today....here's the view of XLU, which looked like it was about to stage a strong rally.

The yellow line is an overlay of the VIX showing how previous spikes in volatility have been ignored by the utility sector.  This time is different.
It's important that we stick to the rules and follow the plan.  Here's an old archive file that looks at reasons why and what happens when some of the "smartest guys in the rooms"don't follow through.