Sizing Up the Latest Rally & A Look at Commodities

SYNOPSIS

Last Week… We’ve had a 5-week winning streak now (for the S&P 500 anyway… and most other major indexes have followed suit). This is the first such sustained rally since a 6-week streak last October/November. Although we may be due for a pause this week or next, there is no reason yet to question the favourable market trends we’re experiencing now.

ProfiTrend Portfolio (PTP)… After some shopping late last week, the PTP is now down to 59% in cash. And, there’s a very good chance that our shopping will continue this coming week. We’re not predicting how long this rally will last, but when conditions are this good, we need to deploy a lot more cash to capitalize on the opportunity.

Unfortunately, our PTP rating relative to the benchmarks has suffered temporarily. Not every newly purchased stock charges out of the gate like a race horse. We added three new stocks on Thursday (St. Patrick’s Day for good luck) so the holding time on those is one day! Annualize two small one-day declines on Friday and that really takes its toll on the PTP average. It’s a consequence of a very small portfolio right now with an average holding time of one week.
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PTA Perspective… Sizing Up the Latest Rally & A Look at Commodities
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With five weeks of gains, memories of the media reporting impending bear markets and a global recession are starting to fade away. Is it a rally in a bear market, or resurgence of the bull? It doesn’t matter really. When conditions are this favourable, we have to be invested on the long side for as long as it lasts. But it is worthwhile sizing up just what has happened over the past month or so. There’s the oil price myth and the interesting way that gold bullion appreciation has led to even faster price gains in gold stocks. What’s more, the phenomenon has spilled over into the mining sector as a whole. We have that and much more in this week’s edition.

Seasonality… With half of March behind us, we begin our coverage of calendar effects for April. It’s normally not a great month for Canadian stocks, but the major US indexes normally perform well. In fact it’s the #1 month of the year for the Dow Jones Industrial Index which rises almost 70% of the time based on a long trail of historical data.

Data & Charts Upgrade… Don’t forget that we now have a new major workbook to join the others in the Data & Charts Workbooks section of the web site. It’s a database of trend and consistency data on ADRs from around the world. Now you can diversify globally in individual stocks with the comfort of knowing which potential equities are rising fastest in price. Read more in the March 7 edition of TrendWatch Weekly.

The “Cat Came Back” Trade on Volatility – The Sequel

SYNOPSIS

Last Week… While last week’s gains weren’t as substantial as those a week before in the major indexes, they’ve driven the trend values higher. What’s more, the broader measures that we follow are really doing well too! All of the 37 countries and geographies that we follow via regional ETFs now have positive trend values, and 80% of the 10,000+ stocks and ETPs that we follow now have positive trend values. Regardless of what the media are still preaching about global recession and bear markets, we’re planning a shopping expedition this week!

ProfiTrend Portfolio (PTP)… The PTP is 70% in cash, and we’re itching to go shopping! We don’t try to predict how long a rally will last, but when the conditions are this good, we need to expand our portfolio beyond the three positions we’re currently holding.

New name, same math… Our PTP annualized price appreciation (APAR) index has improved to 72% from 57% a week earlier, tied with the Canadian market index. We hope to improve that situation soon with new acquisitions. And, yes, we previously used the label “annualized growth rate (AGR)”. We didn’t realize that there was any possibility of confusion, but it’s been pointed out that AGR is a metric that is normally applied to a company’s earnings growth rate. That is quite different from our use of the term meaning price growth rate. So now we’re making it clear with a new name and acronym… APAR. We actually still prefer to call it the “speedo chart”. It truly is a speedometer indicating how fast we are making money with our investments. It’s unique to our PTA 2.0 service and TrendWatch Weekly newsletter.
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You may recall our four-year track record with the PTP shown in the following chart. As the “4 Year” implies, that’s an average of 4 x 52 weeks of APAR data. wpid-bar_speedo_160311mdn-2016-03-14-22-35.png
PTA Perspective… The “Cat Came Back” Trade on Volatility – The Sequel
In the February 15 edition of TrendWatch Weekly, we discussed an interesting trade that falls outside the realm of trend tracking. It’s a volatility play that we dubbed the “Cat Came Back (CCB) Strategy”. It’s simple… (1) when the volatility index (VIX) rises from the teens to above 20 (no matter how much higher) and starts to turn lower again, buy an inverse VIX ETN appropriately labelled XIV (VIX backwards) at whatever level it is trading at. Then, (2) when VIX returns to its long-term median (about 16), sell XIV. Our research study based on the past five years shows an average return of 12% with an average holding time of 11 trading days. 17 of 19 round-trips over the past five years would have been profitable with our fairly rigid algorithm. This week we are revealing the results of the latest trade, and offer some tips on making this trade even more profitable, based on our personal experience with real dollars involved.

Data & Charts Upgrade… Don’t forget that as of last week we now have a new major workbook to join the others in the Data & Charts Workbooks section of the web site. It’s a database of trend and consistency data on ADRs from around the world. Now you can diversify globally with the comfort of knowing which potential opportunities are rising in price most rapidly. Read more in last week’s edition of TrendWatch Weekly.

Depositary Receipts Are the Best Way to Maximize Profits from Investing in Non-North American Equities

SYNOPSIS

Last Week… This rally is really looking real! Aside from our major indexes surging ahead once again, the more important broader measures that we follow are performing very well too.The S&P/TSX Small Cap Index actually jumped 7% over the past week, with the S&P/TSX Venture Index just behind it with a 5% gain. Both of those have the highest positive trend values among the major North American indexes that we report weekly. The Russell 2000 picked up as well and joined the Canadian small cap indexes in third place trend-wise. You know something important is happening when money is shifting from the “safe” large caps to the smaller stocks that historically provide the best returns.

ProfiTrend Portfolio (PTP)… The PTP is 70% in cash. We’re still finding that the proportion of stocks with attractive trend/consistency pairs has not grown as much as we’d like, although the overall number of stocks switching over from negative trends to positive trends continues to grow substantially. We added two consumer stocks late last week, based on sector performance data from last weekend. As you’ll see, however, other sectors have shifted up since then. Our PTP price appreciation index has improved to 57% from 31% a week earlier, but at the moment the S&P/TSX Composite Index AGR is outperforming our small portfolio. We expect that to change soon.
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Investor Confidence… Perhaps institutional investors were anticipating the current rally, because they continued to pump billions of dollars into equities, even as we were watching them decline during the first two months of this year. One day soon we’ll be running a research exercise on the predictive value of the State Street Investor Confidence Index. It’s the only confidence we’re aware of that tracks real money flows instead of investors’ opinions on surveys. Money speaks louder than surveys!

This tablets do not work if you are not cheapest levitra online aroused. Reduced levels of testosterone create generic cialis online lot of health problems. All this deeds were sales uk viagra find to find out more just to hide my impotency. The magic YES mantra is instantly effective at shifting your overall attitude and feelings about life, yet the best side effect of all is it naturally increases your viagra cipla 20mg energy just like in your youth. Seasonality… We extend our coverage of March calendar effects to include some sectors and subsections to watch.

Featured Video… We always like to check into Jim Rogers latest thoughts on the markets when he’s interviewed on BizTV. We found one such interview on Bloomberg TV last week and share it with you in the main edition. But there’s also put together a very short version as well, and you can find that synopsis right here.

PTA Perspective… Depositary Receipts Are the Best Way to Maximize Profits from Investing in Non-North American Equities
We’ve talked about American Depositary Receipts (ADRs) before, but we approach the subject in much more depth this time. Essentially, ADRs are one of the most convenient ways for Americans to invest in foreign equities markets. But in fact anyone who can trade equities on US stock exchanges has access to this opportunity too. We describe the pros and cons of ADRs vs regional ETFs, and some features that are unique to ADRs.

Data & Charts Upgrade… In keeping with the theme of this week’s topic, we’re also pleased to announce a new major workbook to join the others in the Data & Charts Workbooks section of the web site. You probably guessed it… it’s a database of trend and consistency data on ADRs from around the world. Now you can diversify globally with the comfort of knowing which potential opportunities are rising in price most rapidly. Read more in the main edition of TrendWatch Weekly.

Is It Too Late to Ride the Gold Train North?

SYNOPSIS

Last Week… After the previous week where all major indexes rose 2.5% to 4.0% over the four days, we weren’t expecting much follow-through. However, there were some decent one-week gains for all indexes except the S&P/TSX Composite Index, which sustained just a tiny one-week loss. Our two small cap Canadian indexes (S&P/TSX Small Cap Index and S&P/TSX Venture Index) continue to lead the way on a trend basis. On the other hand US small caps as represented by the Russell 2000 are trailing, and in fact have a modestly negative trend.

ProfiTrend Portfolio (PTP)… The PTP is 86% in cash as we patiently wait for more blatant opportunities in all of the markets that we follow. The proportion of stocks with positive trend values across the board is improving, yet the proportion with attractive trend/consistency pairs has not. It appears that most improvements are very minor (even if they are numerous). There was no trading in the PTP last week. The three remaining positions include: two on a volatility ETN (two different start dates, but same security) and a gold stock. Much more on gold and gold stocks this week.
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Investor Confidence… Apparently institutional investors ignore everything in the US business media… no doubt a wise move! In spite of a rough start to 2016 in the equities markets, the “smart money” is still flowing into stocks. However, there are regional differences. This past month (February) a lot of money flowed into Asian equities, even while the US media told us that China was causing a world-wide recession. There was a drop of confidence in Europe, however, as cash flowed from equities into bonds. With North America largely unchanged, the all-inclusive Global Investor Confidence Index fell a mere 2.2 points to 106.5. Above 100 is considered pro-equities (higher risk), whereas readings below 100 suggest a lower-risk approach (bonds instead of stocks). Only the European ICI is below 100 now. As usual we have the charts, data and more commentary.

PTA perspective… Is It Too Late to Ride the Gold Train North?
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Gold and gold stocks have had a nice run since the beginning of the year, with the precious metal up 17% so far. Our discussion includes the usual pros and cons for having some gold in your portfolio. And, if you go for it, do you buy the metal itself, ETFs or individual stocks? You’ll find the answers in this week’s edition.

Combining Growth & Value Metrics with Relative Trend Analysis™

SYNOPSIS

Last Week… The markets showed a pleasant revival to the upside on the shortened trading week. All of our major indexes rose 2.5% to 3.8% over the four days.

ProfiTrend Portfolio (PTP)… The PTP is 87% in cash as we wait to see if this past week’s rally has any staying power. Meanwhile we’ve dropped our short positions, triggered by stop loss signals. Our PTP reading is -4%, up from -31% a week earlier, but not enough to beat the benchmarks (a rare occurrence). The three remaining positions are focussed on ETNs (anticipating a return to “normal” volatility as measured by VIX, as described in last week’s feature article), and a long position on a gold stock.
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Seasonality… March is generally a fairly positive market for the stocks in the major indexes. We offer you the historical details this week; and will continue with sector coverage next time.

PTA perspective… Combining Growth & Value Metrics with Relative Trend Analysis™
We took a side-trip presenting our research on the “Cat Came Back” volatility tactic last week, because it seemed timing. This week we return to walking you through how using value and growth metrics could complement a relative trend analysis™ (RTA) -based investment approach. The general idea is to build a more comprehensive model for investment decisions. Such an approach would combine the best of… (1) finding undervalued stocks, (2) choosing those that have growth potential, and (3) picking stocks with the best short-term consistent trends. This time we have a look at what might be gained from combining multiple fundamental indicators. We think that you may be surprised at how a very simple two-factor approach can blow away the limited success of the strategies still advocated by most financial advisors.

The “Cat Came Back” (CCB) Trade on Volatility

SYNOPSIS

Last Week… The markets were in retreat mode again last week. Declines in the major indexes over the week were -1% to -3%. Only the S&P/TSX Venture Index managed a gain (+0.6%). On a trend basis the least-worse-off indexes are the Canadian ones. That’s not saying a lot, but the rally in precious metals and a stall in the decline of oil are favourable developments in the Canadian resource intensive economy.

ProfiTrend Portfolio (PTP)… The PTP is 75% in cash as we wait out the uncertainty. We still have a few positions… intended to be profitable if either stocks keep falling or the high volatility (VIX) levels return to normal. We’ve added a long position on a gold mining stock and a short position on health care to the PTP last week.

Our PTP reading of -31% is down from +62% a week earlier. Our PTP reading will likely continue to fluctuate considerably given the small number of items in our account, and the (so far) brief holding time.
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PTA perspective… The “Cat Came Back” (CCB) Trade on Volatility

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We don’t believe that anyone can predict periods of high volatility (as measured by VIX), so we’ve been working on a strategy to profit from these events, after they announce themselves via a spike to the upside. VIX may not be a true measure of volatility, but the index behaves in repeating cycles of uneven lengths. We’ve christened a new two-step trading algorithm “The Cat Came Back Trade” (CCB), because it has the same sort of story behind it as the well-known children’s song. We can’t predict how far away the “cat” might go, but we can predict that it’ll come back… if not “the very next day” then sometime soon. Although this event trade falls outside of the relative trend analysis™ (RTA) methodology, we think you’ll find it interesting to see how it works. We walk you through 5 years worth of back-testing results. Average gain… 12% over an average holding period of 11 trading days (363% annualized). It’s not a core strategy, but you might want to try it out… maybe even this week. The conditions may be perfect.

Metrics for Growth Investing

SYNOPSIS

Last Week… Sadly, every time there is an up-week in the markets these days, and we start to get enthusiastic again, we’re promptly slapped back down with heavy declines. In fairness, though, the Canadian small caps represented by the S&P/TSX Small Cap Index and the S&P/TSX Venture Index extended gains from the previous week. That in part was due to strengthening gold and gold stock prices… perhaps the safe haven they were once thought to be.

ProfiTrend Portfolio (PTP)… The PTP is 87% in cash as we wait out the uncertainty. We still have a few positions… intended to be profitable if either stocks keep falling or the high volatility (ViX) levels return to normal.

Our PTP reading of 15% is down from 62% a week earlier. Our PTP reading will likely continue to fluctuate considerably given the small number of items in our account, and the short holding time. At least we’re still staying ahead of our benchmarks.
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PTA perspective… Metrics for Growth Investing
Last week we reviewed some research results from James O’Shaughnessy on which metrics to use for value investing. You learned that using the most popular and most widely used metric, the P/E ratio, is the worst possible way to find bargain stocks that will generate great returns. This week we discuss more of his research… this time focussing on metrics for optimizing growth investing strategies.

Investor Confidence & Seasonality… As of the end of January institutional investors remained relatively confident in holding stocks rather than safer income assets like bonds. The results for February (due on February 23) should be interesting. As for seasonality effects, many of the anticipated strengths in February are failing to materialize. However, recent gains in Materials, particularly Metals & Mining were expected in a typical February. Much of this has been driven by recent gains in gold. And finally, the underperformance of Health Care stocks is also to be expected in February… as is happening right now.

Metrics for Value Investing

SYNOPSIS

Last Week… After a tragic opening to 2016, the markets finally had an up-week, with the exception of the S&P/TSX Venture Index. All trend values for the major indexes that we track remained negative, however.

ProfiTrend Portfolio (PTP)… The PTP is still 85% in cash, but we have a few positions on the short side that we discuss in more detail in the main body of the newsletter. Our portfolio had a nice improvement over the past week, as two positions to the downside generated profits and one short position reversed to the upside. With a bounce in oil prices, the S&P/TSX Composite Index AGR turned positive, but the S&P 500 remains negative.

Our PTP reading moved up nicely from 7% last time to 62% this past week. Expect volatility with the PTP AGR due to the tiny and leveraged portfolio.

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PTA perspective… Metrics for Value Investing
We look at various ways to measure whether stocks are cheap or expensive. These are important for those interested in value investing. The more popular ones include: price-earnings ratios, price-to-book values, price-to-cash flow, and price-to-sales. You may know what each of these mean, but do you know which of them will produce the highest returns when buying bargain stocks? We’ll tell you.

Investor Confidence… The Smart Money Shrugs Off the January Meltdown
The latest State Street Investor Confidence Index results for January are surprisingly not that different from those reported for December. Apparently, the January downdraft hasn’t had any impact on institutional investors (yet).

Seasonality… February normally isn’t a strong month for equities, but Energy and Materials are supposed to perform well. That’s something we desperately need right now. This section now includes some niche sub-sector results that you might find worth checking out.

Coping with Impatience

SYNOPSIS

Last Week… After a tragic opening to 2016, the markets final had an up week. with the exception of the S&P/TSX Venture Index. All trend values for the major indexes that we track remained negative, however.

ProfiTrend Portfolio (PTP)… The PTP is still 86% in cash, but we have a few positions on the short side that we discuss in more detail in the main body of the newsletter. Our portfolio is to the upside again, if only by a small amount.
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PTA Perspective… Coping with Impatience
It’s difficult being an investor sitting on a stack of cash, instead of actively trading to “make as much money as we can, as fast as we can”. Nonetheless there are times when sitting on cash is the best possible strategy. We explain why this week, and offer some tips on what you can be doing while waiting for a sustainable trend to emerge (up or down).
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Investor Confidence… The Smart Money Shrugs Off the January Meltdown
The latest State Street Investor Confidence Index results for January are now available, and the results are surprisingly not that different from those reported for December. Apparently, the January downdraft hasn’t had any impact on institutional investors (yet). The Global ICI decreased to 108.8, down just 1.7 points from December’s revised reading of 110.5. The decline in sentiment was driven by a decrease in the North American ICI from 110.5 to 108.8 along with the Asian ICI falling 1.5 points to 102.9, and the European ICI falling 0.1 points to 103.4. Still, the numbers show that stocks are preferred over safer bonds by the “smart money”.

Seasonality… We begin to cover what’s in store for February in terms of calendar effects. February doesn’t usually offer great returns of stocks, but then January was supposed to have been great! Energy and Materials are supposed to perform well in February. That’s something we desperately need right now.

The Global Picture – Worldwide Recession?

SYNOPSIS

Last Week… If the previous week seemed like the worst week in your investment career, then last week would have offered no relief. The range of losses among major averages for the week were -2.2% to -7.2%. All of the major indexes we track are now trending lower at a pace of 1% to 2% per week. Extrapolate that over 52 weeks and be very afraid, if you still have a large portfolio of stocks. Monday is a US holiday, so we’ll have to wait until Tuesday morning to see whether investors press the panic button or start buying again.

ProfiTrend Portfolio (PTP)… We’re certainly not immune to this devastation with our PTP bundle, as you can see, but we’re 90% in cash (and have been close to that for quite some time now), and have just three positions to worry about.
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Is a global recession imminent given the way stocks have been declining worldwide? Perhaps, but that’s not an easy call to make. We show you some 2015 data for markets worldwide, and lay out the outlook right now for the same countries. We also spend some more time discussing China, and the US media’s misleading representation of China’s impact on US stock prices. In fact we even outline (too late, unfortunately) how we could have made a killing investing solely in Chinese stocks last year. It’s a thought experiment that could well be useful in the future when considering other overseas investment opportunities.

Investor Confidence & Seasonality… The Investor Confidence Index data for January won’t be out for another week or so, but the Investor Confidence data for December is still available in the full edition of the newsletter. We’ve also added a bit of new material on seasonality extracted from the latest edition of the monthly Thackeray Market Letter.