By Steve Blumenthal, CEO, CMG Capital Management Group
From an investment management perspective, I’ve followed and written about trend and investor sentiment for many years. I have found that going through the drill each week in a systematic way helps me stay balanced and in line with the market’s primary trend. I believe risk management is paramount in the investment process. When to hedge, when to become more aggressive, etc.
Trade Signals started after a colleague asked me if I could share my thoughts with him. I have found that putting pen to paper has really helped me in my investment management process and I hope that this research is of value to you.
This week’s Trade Signals: Although cyclical and equity bond trends remain bullish, the NDR Crowd Sentiment Poll registers Extreme Optimism, which is short term bearish for stocks.
Cyclical Equity Market Trend: The Primary Trend Remains Bullish for Stocks
The active signal is highlighted in yellow.
Big Mo follows a weight of evidence approach to determine the market’s cyclical trend.
Click here to see “How I Think About Big Mo.”
13/34–Week EMA Trend Chart: Cyclical Bullish Trend for Stocks
Following is a closer look at the S&P 500 via the ETF “SPY” 2006 to present.
Click here to see “How I think about the 13/34-Week Exponential Moving Average”.
In summary, both Big Mo (Momentum) and the 13/34-Week EMA suggest that the market remains in a cyclical bull market (up trending) state. I believe trend is most important: therefore, buy the dips (on extreme pessimism) as long as the 13/34-Week Blue EMA line is above the Red EMA line and own equities (but hedged as valuations are high, the market bull is aged; thus, overall equity market risk is high).
See the rest of the March 4 Trade Signals and important disclosures at Trade Signals Sentiment Remains Excessively Optimistic, Trend Bullish.
Steve Blumenthal is CEO and CIO of CMG Capital Management Group. The objective behind all of Mr. Blumenthal’s work is to help advisors build better portfolios by allocating with a long term game plan that is risk sensitive and properly diversified. Mr. Blumenthal is a self-proclaimed “quant geek” with an analytical mind for the markets that helps him connect with everyday investors and industry experts alike.