I like to think of this weekly process as a risk management dashboard. Of note this week is the extreme level of investor optimism. Generally, such readings are short-term bearish for equities and suggest a pause or correction within what is a bullish trend environment (see 13/34-Week EMA chart below) for equities.
HY remains in a buy. The Zweig Bond Model suggests holding longer-dated high quality bonds. The CMG Ned Davis Research Large Cap Momentum Index continues to signal caution (i.e., own large-cap equities but hedged). Within the CMG Opportunistic All Asset Strategy, fixed income is showing the strongest relative price strength.
Following are the most recent Trade Signals:
Equity Trade Signals (Green is Bullish, Orange is Neutral and Red is Bearish):
- CMG Ned Davis Research (NDR) Large Cap Momentum Index: Sell Signal – Bearish for Equities. (Last signal on June 30, 2015, S&P 500 Index level 2063.11)
- Long-term Trend (13/34-Week EMA) on the S&P 500 Index: Buy Signal – Bullish Cyclical Trend for Equities
- Volume Supply (selling) is greater than Volume Demand (buying): Buy Signal – ST Bullish for Equities
- NDR Big Mo: See note below (active signal: Buy signal on March 4, 2016 at 1999.99)
- Don’t Fight the Tape or the Fed: Indicator Reading = +1 (Bullish for Equities)
Investor Sentiment Indicators:
- NDR Crowd Sentiment Poll: Extreme Optimism (short-term Bearish for Equities)
- Daily Trading Sentiment Composite: Extreme Optimism (short-term Bearish for Equities)
Fixed Income Trade Signals:
- Zweig Bond Model: Buy Signal
- CMG Managed High Yield Bond Program: Buy Signal
Economic Indicators:
- Global Recession Watch Indicator – High Global Recession Risk
- U.S. Recession Watch Indicator – Low U.S. Recession Risk
Gold:
- 13-week vs. 34-week exponential moving average: Buy Signal – Bullish for Gold
By Steve Blumenthal | For charts, analysis, and commentary see the rest of the story in Trade Signals: Investor Sentiment Reflects Extreme Optimism
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.
