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Archives for August 2016

Trade Signals – Overvalued, Sentiment Remains in Bullish Extreme (S/T Bearish for Stocks), Cyclical Bull Uptrend

Posted on 08.31.16 |

With a nod towards broad portfolio diversification, following is a quick summary of what I am seeing this week — organized by investment category (equity markets, fixed income and liquid alternatives):

  • Equity Markets: The weekly Ned Davis Research (NDR) investor sentiment remains extremely optimistic (short-term bearish for equities). The daily sentiment indicator is now neutral from extreme optimism (neutral for equities).  At this time, there’s more buying demand vs. selling supply (a bullish signal), the market trend remains positive.  Don’t Fight the Tape or the Fed moved recently from a +1 to 0 (now neutral on equities).  The 13/34-Week EMA trend indicator remains bullish.  The CMG NDR Large Cap Momentum Index is nearing a buy signal.  Valuations, which we’ll look at again in this Friday’s On My Radar, remain extreme (overvalued), so while trend evidence suggests a neutral to positive view on equities, I continue to favor an underweight exposure to equities and hedge.
  • Fixed Income: HY remains in a buy signal or uptrend and the Zweig Bond Model remains in a buy (bullish on high quality fixed income). We see “JNK” and “PCY” exhibiting the strongest relative strength in fixed income (this from a universe of nine ETFs ranging from short-term and long-term Treasury bonds, corporate bonds, munis, high yield, emerging market, inflation and developed market bonds).  It’s been a good year for bonds.
  • Liquid Alternatives: Gold (“GLD”) is testing support at 125. The CMG Opportunistic All Asset ETF Strategy is currently allocated approximately 81% to equities and 19% to fixed income.  We allocated to “IYF,” a U.S. Financial ETF in the last week, trading out of “BND,” a bond ETF.  Emerging markets and technology continue to show strong price leadership.  Biotech has had a tough week.

For charts, analysis, and commentary see the rest of the story in Trade Signals – Overvalued, Sentiment Remains in Bullish Extreme (S/T Bearish for Stocks), Cyclical Bull Uptrend.

The current opinions and forecasts expressed herein are solely those of Steve Blumenthal and are subject to change.  They do not represent the opinions of CMG.  CMGs trading strategies are quantitative and may hold a position that at any given time does not reflect Steve’s forecasts.  Steve’s opinions and forecasts may not actually come to pass. Information on this site should not be used as a recommendation to buy or sell any investment product or strategy.

Categories: Tactical Investment Strategies Tags: CMG opportunistic All Asset Strategy, Equities, ETFs, Steve Blumenthal, Stocks, Tactical Investing, Trade Signals

The slow, long expansion

Posted on 08.29.16 |

A client asked me how economic growth post the great financial crisis compares to other prior periods.  I did some digging and found this from Ned Davis Research, “Currently in its eighth year of growth, this expansion is the fourth longest of the postwar period.  Early next year it will be number three.  The longest expansion was ten years, which ended in March 2001 and encompassed the technology boom.”

Here is a look at the data from 1947 to present:

Anatomy of Post War Economic Expansions 03/1947 - 07/2016

Read More >

Categories: Tactical Investment Strategies Tags: On My Radar, Steve Blumenthal, Zweig Bond Model

Trade Signals For Equities, Fixed, Liquid Alts

Posted on 08.25.16 |

CMG Capital Management Group Inc.With a nod towards broad portfolio diversification, here is a quick summary of what I am seeing — organized by investment category (equity markets, fixed income and liquid alternatives):

  • Equity Markets: Investor sentiment remains extremely optimistic (short-term bearish for equities), Don’t Fight the Tape or the Fed moved recently from a +1 to 0 (now neutral on equities). The 13/34-Week EMA trend indicator remains bullish.  The CMG NDR Large Cap Momentum Index is nearing a buy signal.  While valuations remain extreme (overvalued), trend evidence suggests a neutral to positive view on equities (hedged).
  • Fixed Income: High Yield remains in a buy signal or uptrend and the Zweig Bond Model remains in a buy (bullish on high quality fixed income).
  • Liquid Alternatives: The CMG Opportunistic All Asset ETF Strategy is currently allocated 73% to equities and 27% to fixed income. Recent additions include technology, biotech and Emerging Market equities.  For weightings by asset class, please see the pie chart below.

Several additional thoughts: Investor sentiment remains extremely optimistic (which is generally short-term bearish for equities).  Due to high valuations and the aged nature of the cyclical bull market, I favor underweighting exposure to equities (hedged).  I favor an endowment-like portfolio with approximately 30% exposure to equities (hedged), 30% fixed income (tactically managed) and 40% to liquid alternatives (e.g., tactical all asset, managed futures, global macro and gold).

Here is a not-so-fun fact: According to Ned Davis Research, the S&P 500 has gained just 2.41% annualized per year since December 31, 1999 (see Don’t Fight the Tape or the Fed indicator below).  It has gained just 4.45% annualized per year since December 31, 1997 (see Volume Supply/Demand indicator below)…. by Steve Blumenthal

For charts, analysis, and commentary see the rest of the story in Trade Signals: Sentiment Too Bullish: S&P 500 Annualized Return Since 12/31/99 to Present just 2.41% (Wow!) 

The current opinions and forecasts expressed herein are solely those of Steve Blumenthal and are subject to change.  They do not represent the opinions of CMG.  CMGs trading strategies are quantitative and may hold a position that at any given time does not reflect Steve’s forecasts.  Steve’s opinions and forecasts may not actually come to pass. Information on this site should not be used as a recommendation to buy or sell any investment product or strategy.

Categories: Tactical Investment Strategies Tags: CMG opportunistic All Asset Strategy, Steve Blumenthal, Trade Signals

Everyone Is In The Dark

Posted on 08.22.16 |

CMG Capital Management Group Market AnalysisWhen it comes to research, I favor managers with skin in the game.  Paul Singer is one of those managers.  His firm, Elliott Management, manages $28 billion in assets, making it one of the world’s largest hedge funds.  Years ago, in my hedge fund days, we had an investment in his fund.  He is smart, experienced and seasoned.

Singer warns that the bond market is “broken” and that when the central bank actions of recent years no longer ward off a market downturn, the subsequent loss of confidence could be severe.  Singer states, “Trading in this market is particularly difficult….  Everyone is in the dark.”  He continues, “Experience doesn’t count for much, and extreme confidence may be fatal.”

My mantra has been to own equities but with some downside hedge in place.  Almost one-half of the Western world’s outstanding sovereign debt—$12.6 trillion worth—traded at negative yields last week, according to the Financial Times.  With economics, “no government can play god.”  We’ll find out soon enough.

For charts, analysis, and commentary see the rest of the story in On My Radar: “In the Realm of Economics, No Government Can Play God.| By Steve Blumenthal |

The current opinions and forecasts expressed herein are solely those of Steve Blumenthal and are subject to change.  They do not represent the opinions of CMG.  CMGs trading strategies are quantitative and may hold a position that at any given time does not reflect Steve’s forecasts.  Steve’s opinions and forecasts may not actually come to pass. Information on this site should not be used as a recommendation to buy or sell any investment product or strategy.

Categories: Tactical Investment Strategies Tags: Elliott Management, On My Radar, Paul Singer, Steve Blumenthal

Trade Signals for Equity, Fixed, Liquid Alts

Posted on 08.18.16 |

CMG Capital Management Group Inc.A quick summary of what we are seeing by investment category (equity markets, fixed income and liquid alternatives):

  • Equity Markets: Investor sentiment remains extremely optimistic (short-term bearish for equities), Don’t Fight the Tape or the Fed moved from a +1 to 0 (now neutral on Equities). The 13/34-Week EMA trend indicator remains bullish.  The CMG NDR Large Cap Momentum Index is nearing a buy signal.  Neutral to positive on equities.
  • Fixed Income: HY remains in a buy signal and the Zweig Bond model remains in a buy.
  • Liquid Alternatives: The CMG Opportunistic All Asset ETF Strategy is taking on more risk. Recently, we increased allocations to technology and biotech.  Yesterday, we sold out of short duration bonds (“MINT”) into Vanguard Total World Stock ETF (“VT”).

Read More >

Categories: Tactical Investment Strategies Tags: CMG NDR Large Cap Momentum Index, Steve Blumenthal, Trade Signals, Zweig Bond Model

What Would Janet Do?

Posted on 08.16.16 |

Janet YellenLet’s take a look today at just how attractive U.S. interest rates are relative to most of the world.  To wit, the title of this week’s On My Radar piece, “The Best Looking Dude at the Dance.”  Who in their right mind could have imagined that 1.50% would be attractive?  We’ll look at the comparisons today and consider the implications.  Lower for longer?  Dr. A. Gary Shilling says yes.  I’m getting concerned that too many are now in that camp (yours truly among them).

The bond market seems to have forgotten last Friday’s strong employment report.  The worry about “What Would Janet Do” (raise interest rates) has subsided.  The yield on the 10-year Treasury jumped from 1.49% to 1.58% back down to 1.50%.  What is this telling us? One thing that’s apparent to me is that the global capital flow advantage goes to the U.S.

Read More >

Categories: Tactical Investment Strategies Tags: Janet Yellen, On My Radar, Steve Blumenthal, The Fed

Market Today Feels Like 1997

Posted on 08.12.16 |

CMG Capital Management Group Inc.Technically, the S&P 500 Index looks strong.  The price trend, as measured by the 13/34-Week MA (posted below) turned positive in late March 2016.  My favorite “weight of evidence indicator,” the CMG Ned Davis Research Large Cap Momentum Index, is nearing a buy signal.

Further, the “Don’t Fight the Tape or the Fed” indicator is in a favorable equity market signal and Volume Demand (buyers) continues to be greater that Volume Supply (sellers).  You will find the charts below.

Read More >

Categories: Tactical Investment Strategies Tags: CMG Ned Davis Research Large Cap Momentum Index, Steve Blumenthal, Trade Signals, Zweig Bond Model

Trend Following Works!

Posted on 08.07.16 |

2016-08-07We will look back and identify this market as one of the most reckless financial bubbles of all time.  We will look back and identify the next correction as one of the greatest buying opportunities of all time.

Investors are expecting their advisors to deliver 10% returns.  There will be disappointment.  A lot of money is going to be in motion.  I favor a broad-based, holistic asset diversification.  Include strategies that may gain in both bull and bear markets.  Own some gold.  Risk protect that equity exposure and stay tactical with your high yield bond exposure.  Robo-like 60/40 is in trouble.

Trend Following Works!  Learn more about trend following here.  Ahead, I see it as a great opportunity for you and your business. See more advisor investing education pieces in the Advisor Resource Center. By Steve Blumenthal 

The current opinions and forecasts expressed herein are solely those of Steve Blumenthal and are subject to change.  They do not represent the opinions of CMG.  CMGs trading strategies are quantitative and may hold a position that at any given time does not reflect Steve’s forecasts.  Steve’s opinions and forecasts may not actually come to pass. Information on this site should not be used as a recommendation to buy or sell any investment product or strategy.

Categories: Tactical Investment Strategies Tags: Steve Blumenthal, trend following

The Reality of Forward Returns

Posted on 08.07.16 |

Today, let’s take a look at the most recent market valuations and what they are telling us about forward returns over the next ten years.  But keep in the back of your mind that you can get pretty close on seven and ten-year return probabilities but it is a coin flip on what the equity returns will be over next number of months.

We do know that the insatiable demand for stocks with above average yield is causing valuations to diverge materially from historical norms.  This may continue.  In a recent State Street poll, investors were asked what their returns expectations are for the next five years and beyond for real estate, commodities, equities and bonds.

Read More >

Categories: Tactical Investment Strategies Tags: On My Radar, Steve Blumenthal

Zweig Bond Model A Buy

Posted on 08.06.16 |

I noted several weeks ago that investor sentiment had reached a bullish extreme. Such readings are generally short-term bearish for equities. With the stock market down seven days in a row, investor optimism has declined but still remains excessively optimistic. The best returns come from points of extreme investor pessimism: Here is what I mean (yellow shading marks the current reading):

Ned Davis Research

source: Ned Davis Research

Read More >

Categories: Tactical Investment Strategies Tags: CMG Managed High Yield Bond Program, CMG Ned Davis Research Large Cap Momentum Index, Steve Blumenthal, Trade Signals, Zweig Bond Model

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Hypothetical Presentations: To the extent that any portion of the content reflects hypothetical results that were achieved by means of the retroactive application of a back-tested model, such results have inherent limitations, including: (1) the model results do not reflect the results of actual trading using client assets, but were achieved by means of the retroactive application of the referenced models, certain aspects of which may have been designed with the benefit of hindsight; (2) back-tested performance may not reflect the impact that any material market or economic factors might have had on the adviser’s use of the model if the model had been used during the period to actually mange client assets; and, (3) CMG’s clients may have experienced investment results during the corresponding time periods that were materially different from those portrayed in the model. Please Also Note: Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance will be profitable, or equal to any corresponding historical index. (i.e. S&P 500 Total Return or Dow Jones Wilshire U.S. 5000 Total Market Index) is also disclosed. For example, the S&P 500 Composite Total Return Index (the “S&P”) is a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. Standard & Poor’s chooses the member companies for the S&P based on market size, liquidity, and industry group representation. Included are the common stocks of industrial, financial, utility, and transportation companies. The historical performance results of the S&P (and those of or all indices) and the model results do not reflect the deduction of transaction and custodial charges, nor the deduction of an investment management fee, the incurrence of which would have the effect of decreasing indicated historical performance results. For example, the deduction combined annual advisory and transaction fees of 1.00% over a 10 year period would decrease a 10% gross return to an 8.9% net return. The S&P is not an index into which an investor can directly invest. The historical S&P performance results (and those of all other indices) are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual in determining whether the performance of a specific portfolio or model meets, or continues to meet, his/her investment objective(s). A corresponding description of the other comparative indices, are available from CMG upon request. It should not be assumed that any CMG holdings will correspond directly to any such comparative index. The model and indices performance results do not reflect the impact of taxes. CMG portfolios may be more or less volatile than the reflective indices and/or models.
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