Archives for January 2016
Cyclical Equity Market Trend: The Primary Trend Is Bearish for Stocks
CMG NDR Large Cap Momentum Index – Sell Signal – The Momentum and Market Breadth Data is reading Bearish for U.S. Equities (last signal was on June 30, 2015 with the S&P 500 Index at 2063.11). This is my favorite risk on/risk off equity market indicator.
China marked its currency lower once again yesterday. That makes eight days in a row they lowered the yuan. Last August, they devalued the yuan and that sent global equity markets into a dive. As Yogi Berra would say, “It’s déjà vu all over again.”
For many years, the yuan had been pegged to the dollar. The Fed’s move to raise interest rates not only strengthens the dollar versus most every other global currency, it also strengthens the yuan for the yuan is largely pegged to the dollar.
Stephen Blumenthal, founder and CEO of CMG Capital Management Group in King of Prussia, Pennsylvania, is a strategist specializing in using quantitative processes to identify areas of strong relative price leadership:
O’Shares FTSE Asia Pacific Quality Dividend Hedged (OAPH): A smart-beta ETF focusing on companies that meet certain requirements for market capitalization, liquidity, quality, low volatility and high dividend yield.
If you haven’t seen the movie The Big Short, go see it. Christian Bale (left) plays Michael Burry in Adam McKay’s adaptation of Michael Lewis’s book about the 2008 financial crisis. Burry was one of the hedge fund managers me and my team knew well. He and others helped us to better understand the approaching sub-prime crisis. I wrote about the issue frequently back then.
Nobody knew when it would happen nor the depth of the break, but we were pretty sure it would be big. As it turned out, it was far worse than we anticipated. I never imagined the near collapse of the financial system. I should have gone short the sub-prime trade I was well aware of, or shorted Fannie Mae, or the mortgage lenders or the banks.