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.
