Putting the Pieces Together in Uncertain Times

SYNOPSIS
The major US indexes rose last week, as did the S&P/TSX Venture Index. The S&P/TSX Composite Index and S&P/TSX Small Cap Index continued lower. Nasdaq continues to be the trend leader, but all major Canadian stock indexes are still trending lower.

ProfiTrend Portfolio… The annualized growth rate for the ProfiTrend Portfolio is now at +147%, up from 100% last time. In spite of soft broad market conditions, we’re well ahead of the benchmark indexes.
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Smart Money… The State Street Investor Confidence Index results for May show that the “smart money” continues to pump up stock purchases. The Global ICI increased to 120.8, up 7.0 points from April’s revised reading of 113.8. Confidence among North American investors increased with the North American ICI rising 8.0 points to 129.4, up from April’s revised reading of 121.4. Meanwhile, the Asia ICI rose by 7.4 points to 98.6. However, the European ICI fell 5.5 points to 103.8. The results for June will be out on June 30.

Commentary… Putting the Pieces Together in Uncertain Times
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For weeks now we’ve been in a quandary about overall market conditions. The trend for Canadian stocks is decidedly down (but not all that consistently yet), while US stocks are holding in a 50:50 pattern. Half the stocks have positive trends, half negative. So, what do we do under these circumstances? This week is a walk-through of how I will be trading within the current market outlook. There will be tips for newcomers, and updates on strategies for the seasoned relative trend analysis™ (RTA) users among our membership.

What Difference Does a Week Make?

SYNOPSIS
While the key US market indexes aren’t far off of their recent all-time highs, the broader market that we examine (using the proportion of stocks with positive or negative trend values) is continuing to turn decidedly bearish.

ProfiTrend Portfolio… The annualized growth rate for the ProfiTrend Portfolio is now at +100%, down from 150% last time. In spite of deteriorating market conditions, we’re well ahead of the benchmark indexes.
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Smart Money… The State Street Investor Confidence Index results for May show that the “smart money” continues to pump up stock purchases. The Global ICI increased to 120.8, up 7.0 points from April’s revised reading of 113.8. Confidence among North American investors increased with the North American ICI rising 8.0 points to 129.4, up from April’s revised reading of 121.4. Meanwhile, the Asia ICI rose by 7.4 points to 98.6. However, the European ICI fell 5.5 points to 103.8.

Seasonality… We wrap up coverage of the June calendar effects by discussing the 4th of July trade. Purchasing an ETF based on the S&P 500 ahead of the US holiday and selling it afterwards could return 0.9%, with a 72% probability of success. The critical issue is the timing… specifically when to buy and sell.

Special Report… What Difference Does a Week Make?
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Have you ever got caught up wondering whether a weekly price move on the DJI or S&P/TSX Composite Index in the “triple digits” is really as ominous as the talking heads on TV seem to imply? In this week’s Special Report segment we delve into the past 10 years of weekly price differences for the S&P/TSX Composite Index, the S&P 500, and each of the largest cap stocks included in each index. The goal of this mini-research project is simply to put weekly fluctuations in perspective. That’s part of what the “relative” in relative trend analysis™ (RTA) is all about.

Market Trends Continue to Deteriorate

SYNOPSIS
We had more declines among all of the major indexes that we report again last week. The broader picture is even worse. The balance of stocks with positive trend values across all of Canada and the US continues to turn negative. Our Premium Service databases include about 7000 US stocks, 2000 Canadian equities and roughly 2000 exchange traded products (ETPs). We commute trend values for all of them. The bad news is that 57% of US stocks are trending lower, as are 61% of Canadian stocks and 71% of ETPs. Caution is indicated, unless you’re already on the short-side with your trading activities.

ProfiTrend Portfolio… The annualized growth rate for the ProfiTrend Portfolio is now at +150%, up from 142% last time. We’re well ahead of the benchmark indexes, which turned negative as of the end of the week.
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Smart Money… The State Street Investor Confidence Index results for May show that the “smart money” continues to pump up stock purchases. The Global ICI increased to 120.8, up 7.0 points from April’s revised reading of 113.8. Confidence among North American investors increased with the North American ICI rising 8.0 points to 129.4, up from April’s revised reading of 121.4. Meanwhile, the Asia ICI rose by 7.4 points to 98.6. However, the European ICI fell 5.5 points to 103.8.

Seasonality… We’ve added to our coverage of the calendar effects for June, by looking at the best performing sector and sub-sector opportunities. We also describe a Biotech seasonal play that lasts three months… mid-June through mid-September.

Topic of the Week… Regrettably, as we were transferring the results from a recent research project to TrendWatch Weekly, we identified some mathematical inconsistencies in the data. Rather than delay the newsletter further, we decided to proceed without a Topic of the Week this time. We’ll re-run the numbers, and you’ll see the results next week.

Niche Sector Indexes – Canada

SYNOPSIS
While the month of May as a whole didn’t fare too badly, this past week soured everything with substantial declines among all of the major indexes that we report. Worse yet, the balance of stocks with positive trend values across all of Canada and the US (not just within the popular indexes) has shifted to less than 50% (specifically 38% in Canada, 44% in the US).

ProfiTrend Portfolio… The annualized growth rate for the ProfiTrend Portfolio is now at +142%, up from 113% last time. We’re well ahead of the benchmark indexes, which turned negative as of the end of the week.
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Smart Money… The State Street Investor Confidence Index results for May are included throughout the month as usual. The “smart money” continues to pump up stock purchases. The Global ICI increased to 120.8, up 7.0 points from April’s revised reading of 113.8. Confidence among North American investors increased with the North American ICI rising 8.0 points to 129.4, up from April’s revised reading of 121.4. Meanwhile, the Asia ICI rose by 7.4 points to 98.6. However, the European ICI fell 5.5 points to 103.8.

Seasonality… Our usual source for calendar effects, Brooke Thackray, has finally posted his market and sector videos for May… on the last trading day of the month. Even so, we’ve decided to include them, since he also offers a bit of guidance for June as well.

Topic of the Week… Niche Sector Indexes – Canada

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Some parts of a pie just can’t be fit together. Last week we discussed how the Global Industry Classification Standard (GICS) can be used to create a pie chart showing an entire country’s economy from the perspective of it’s publicly traded companies. All companies ultimately belong to just one of 10 sectors, so it’s meaningful to review the size of each sector (percentage-wise), without worrying about overlap. We compared the S&P 500 pool of companies with the S&P/TSX Composite Index pool last week to highlight the differences. This week we review some equity based indexes that don’t fit together so neatly. There are quite a number of specialized indexes that have been created from investor demand, rather than because they fit together in an integrated fashion. We have a look at about 20 of these, designed for the Toronto Stock Exchange. The S&P indexing group manages all of the TSX indexes these days, so these are no exception. Based on our preference for top-down stock picking, some of these can be quite useful.