High Yield hit stop-loss levels and is back to a sell. Investor pessimism moved to extreme. Such periods of extreme pessimism have historically been short-term bullish for equities. High-quality bonds remain in a buy signal. The equity market uptrend remains in place (though weakening). The CMG Ned Davis Research Large Cap Momentum Index continues to suggest caution.
Managed futures funds performed well through the Brexit crisis. The theme remains the same: equity valuations are high, fixed income yields are low. Include a portfolio weighting to flexible/unconstrained strategies, such as tactical fixed income, tactical equity and liquid managed futures.
Further, I’ve recently published a white paper entitled, “The Total Portfolio Solution.” The paper evaluates equity market valuations and suggests strategic tilts. Overweight equity market exposure when stocks are attractively valued and underweight exposure when stocks are richly priced. Included is a third investment category – liquid alternatives (tactical, managed futures, unconstrained).
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): Sell Signal – ST Bearish 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: Neutral Optimism (short-term Bullish for Equities)
- Daily Trading Sentiment Composite: Extreme Pessimism (short-term Bullish for Equities)
Fixed Income Trade Signals:
- Zweig Bond Model: Buy Signal
- CMG Managed High Yield Bond Program: Sell 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 the rest of the story see Trade Signals: Oversold, Extreme Pessimism Short Term Bullish, Risk High
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.
