The market has a natural ebb and flow to it; a pattern of inhales and exhales. While we can never predict the exact duration or depth of the next ‘breath’, we can determine if it is inhaling or exhaling, and when we have reached a statistical extreme in either direction.
A look across the equity landscape clearly suggests that the weight of the evidence remains positive as all of the market indicators are positive at this time. The most notable observation over the last couple of weeks is that the equities market has progressed from moderately overbought to significantly overbought on a near-term basis.
The most recent market cycle has created quite a noticeable gap in performance between domestic and international assets. Keep in mind that International equity assets moved into favor back in April 2009, and remained an emphasized asset class until falling out of favor just a few weeks ago. The recent market cycle has produced new highs for much of the US market but very few of the International markets; the exception being developing markets. A snapshot of where the relative strength resided in June 2009 is very telling, as developed markets were at the bottom of the relative strength matrix and developing markets were situated atop the matrix, foretelling what has come to pass: the developing international markets outperforming the developed international markets.
Thursday, March 25, 2010
Monday, March 1, 2010
Gold Medal Worthy?
Every four years when the Winter Olympics come around, I can't help but stay glued to the television and watch with awe the extraordinary athleticism, agility, speed, and calculated recklessness on display. It's astounding to think that out of the thousands of athletes that compete in these sports, the ones who end up on the medal podium are the ‘cream of the crop’ or, ‘world class’.
The same can be said about a number of stocks and ETFs currently – they are out performing their peers. Much like an Olympic athlete who has to compete against others in his/ her respective event so too do investments. Think about it for a second; there are thousands of stocks that are traded throughout the world, all of these stocks have to compete against their peers and the overall market. So when determining which stock or ETF is worthy of that coveted gold medal – i.e. a place in the portfolio -- it's best to start by putting the stock or ETF through a relative strength competition so that your portfolio is populated with gold, silver & bronze ‘medalists’ and not the has-beens. This is best done by analyzing trend and relative strength.
Thus far a snapshot of returns for the major equity benchmarks suggests a dearth of medals, with a rather tepid start to the year. With eight weeks of 2010 already recorded history, the S&P 500 (SPX) is down just 0.95%, while the S&P Equal-weighted Index is up 0.72%. These numbers do not tell the entire story, since over the duration of those 8 weeks the market experienced some rather defined phases; beginning with a strong push to new highs at the start of the year, which fizzled in mid-January. From that point the overall markets regressed to mean, and then beyond, falling 7-10% based on the major equity benchmarks. Subsequently, the markets have fought back to essentially where they began the year. US Equities remain an emphasized asset class while non-emerging market international has fallen from favor. The general trend characteristics remain positive, but risk levels are elevated. This has caused me to take a ‘tapping the brakes’ approach with respect to Equity exposure.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence.
The same can be said about a number of stocks and ETFs currently – they are out performing their peers. Much like an Olympic athlete who has to compete against others in his/ her respective event so too do investments. Think about it for a second; there are thousands of stocks that are traded throughout the world, all of these stocks have to compete against their peers and the overall market. So when determining which stock or ETF is worthy of that coveted gold medal – i.e. a place in the portfolio -- it's best to start by putting the stock or ETF through a relative strength competition so that your portfolio is populated with gold, silver & bronze ‘medalists’ and not the has-beens. This is best done by analyzing trend and relative strength.
Thus far a snapshot of returns for the major equity benchmarks suggests a dearth of medals, with a rather tepid start to the year. With eight weeks of 2010 already recorded history, the S&P 500 (SPX) is down just 0.95%, while the S&P Equal-weighted Index is up 0.72%. These numbers do not tell the entire story, since over the duration of those 8 weeks the market experienced some rather defined phases; beginning with a strong push to new highs at the start of the year, which fizzled in mid-January. From that point the overall markets regressed to mean, and then beyond, falling 7-10% based on the major equity benchmarks. Subsequently, the markets have fought back to essentially where they began the year. US Equities remain an emphasized asset class while non-emerging market international has fallen from favor. The general trend characteristics remain positive, but risk levels are elevated. This has caused me to take a ‘tapping the brakes’ approach with respect to Equity exposure.
Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence.
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