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Bartometer

September 12, 2020

Hello Everyone,

I hope all of you had a nice summer. It was definitely different from what we are used too to say the least. Covid 19 has positively changed our lives and businesses in so many ways. With 6.7 million cases and 200,000 deaths reported the USA, businesses are doing business differently than we are accustomed too. To keep us safe we are using the phone, Zoom, DocuSign, the fax and scanning more than we ever did. In addition we are using online services more as well. This is definitely hurting much of the economy that relies on people going to the malls, restaurants, stores, and other “nonessential” businesses. Restaurants are coming back a little but not that much, and most business traffic is down significantly from one year ago. Resort, cruise ship, hotel and airline traffic are way down as well. But, the technology sector as people are using their home office and staying home playing games and online shopping is up tremendously. This will continue for as long as Covid 19 is present. As the hopes of a vaccine over the next 6 to 8 months become apparent the normal economy should strengthen and people will start to travel more, go to their offices and use all the services they did prior to Covid 19. It will take some time but when things go back to the norm, and there is a safe and effective vaccine that won’t give you other diseases I think most businesses will come back, but not all of them. Has the consumer changed during the Covid pandemic? Yes, their habits have changed and some businesses will go away and new ones will emerge. The idea to investing is to keep an eye on the new emerging businesses and possibly invest in those that could have long term trend on the upside.

This year more than two thirds of all S&P stocks are down for the year. That is why the Equal weighted S&P is down 5% for the year. The equal weighted S&P 500 means that every stock will have a 0.2% weighting as opposed to the tech stocks like Apple having a 6%+ weighting. That is why the S&P 500 is up 4.4%. It’s because stocks like Apple, Amazon and Microsoft going up so much this year and have skewed the indexes and have us believe that the market is doing better than it is. Tech is doing well and they represent the largest market value in the S&P 500 but most of the S&P stocks are down for the year.

CURRENT TRENDS:

We are now in the part of the year where seasonal weakness on the stock market happens. Between mid to late August and October the stock market, historically has been weak. It’s not guaranteed but my computer models went to Sell signals a week or so ago, and caution over the short term is now appropriate. This doesn’t mean to sell everything, no, maybe realign your allocation and sell some depending on your time, risk tolerance, and goals. The market between now and after the election could get more volatile. This Monday if the main indexes (S&P; Dow; NASDAQ) fall below the 50 day moving average I will have a much more negative outlook.

As you can see below the only thing that is up is the tech sector that’s in the NASDAQ, and the market weighted S&P for the most part. It’s all about technology that is used at home for business and leisure.

Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until September 12, 2020.

Dow Jones -2.2%
S&P 500 +4.4%
EQUAL WEIGHTED S&P 500 –5.0%
NASDAQ Aggressive growth +27%
Large Cap Value -9.3%
I Shares Russell 2000 ETF (IWM) Small cap -9.0%
Midcap stock funds -9-11.-12%
International Index (MSCI – EAFE ex USA -4.2%
Financial stocks -18%
Energy stocks -43%
Healthcare Stocks +3.6% Moderate Mutual Fund Investment Grade Bonds (AAA) Long duration –3.56%
High Yield Merrill Lynch High Yield Index -0.5% Floating Rate Bond Funds -1.9%
Short Term Bond +1.6%
Fixed Bond Yields (10 year) .67% Yield

Classicalprinicples.com and Robert Genetskis Excerpts:

Market Outlook

The correction in stock prices continued this past week as the NASDAQ and QQQs fell 5%. They are both down roughly 10% off their highs of just over a week ago. The Dow, S&P500, and small caps fell 2%-3% as the market continues to consolidate. On a positive note, the declines brought all major indexes back it the vicinity of their 50-day moving averages. The steep decline in the Nasdaq brought it back from an extremely overvalued position. The S&P500 is now fairly valued. There was no significant news moving the market. Rather, it appears the market got ahead of itself and is now back on track. While the market will do what it will do, I expect the most likely course will be a leveling off close to its current position. This is not a time for aggressive buying or selling, but a time to stay put.

A Look Back

This week’s Inflation numbers provided the only economic news. Consumer prices in August continued to rebound rising at a 4% rate for the third consecutive month. The year over year increases are still below 2%. Surprisingly, even though commodity prices rose sharply, wholesale prices of finished goods ticked down. Go figure. Unemployment news was mostly unchanged in the latest week. Initial claims for unemployment insurance were unchanged at 884,000 in the first week of September. This is just over a million fewer claims than in August. Unemployment insurance payments in August went to 14 million workers, 3 million less than in July. While the economy has recovered rapidly, there were still 14 million unemployed in August.

source: AIQ Systems

The S&P is above. This is the Market Weighted S&P about which we refer.
Three things happened.

  1. The S&P broke the upward trend line. This is negative
  2. We are just above the 50 Day moving Average.
  3. It is right at support of the breakout in July

What this means to me and this is not guaranteed is that if the S&P has a big down day and CLOSES below 3263 it would set us up for a longer decline and correction in the market, The NASDAQ closed below the 50 day moving average Friday. If the market doesn’t go up and stay up Monday or Tuesday then in my opinion there should be more downside. The MACD or momentum index has crossed below the signal Sell line. The SD-SD Stochastics has crossed below the signal line but the short term Stochastics has gone to a short term oversold level. So we could have a bounce right here.

I am very concerned about the crossing and closing below the 50 day moving average. So a decisive break and close below the 50 moving average is very important and not a good thing. We are not there yet.

This is the short term daily chart. This shows more short term volatility. Longer term the market still long okay and is still in an upward trend.

source: AIQ Systems

The NASDAQ and the tech stocks have been the big winner this year by a longer shot. With most stocks down for the year, the tech stocks like Apple, Microsoft, Amazon, Zoom and more have clearly been the big winners and leaving the other 905 of stocks in the dust. As you can see to the left, the NASDAQ is above the highs reached in February while the S&P and the Dow are below the highs in February. The NASDAQ is now of concern. Look to the left as you will see three things. I will point them out.

  1. The Trend-line that started in April is now broken
  2. The 50 Day moving Average was violated Friday. Negative
  3. The NASDAQ better not break the SUPPORT level of 10822, and is only 30 points below. If it does, there is no SUPPORT until 9839 on the NASDAQ, then 9457, the 200 Day Moving Average.

Momentum has broken down as seen by the pink line dipping below the blue line. In addition Volume has picked up as the NASDAQ fell.
Lastly, the Advance Decline Line has been negative while the NASDAQ has gone higher. See the NASDAQ go higher as most stocks have fallen? This is not a good sign and it shows that most stocks are going down while only a few large company stock are going higher.

I’m expecting a short term bounce here but the NASDAQ needs to stay above its 50 day moving average. In addition, the market is now in seasonal weakness. Going into October coupled with the upcoming election in November. This is not a time to get aggressive, but to take some stock or equity funds off the table.

The NASDAQ needs to stay above support and the 50 day moving average. If it doesn’t it should go lower.

Support levels on the S&P 500 area are 3321, 3101, 3054, and 2890.

These might be accumulation levels, especially 2649, or 2500. 2936 and 3015 are resistance.

Support levels on the NASDAQ are 10819, 10626, 9838 and 9419. Topping areas are 11,361 and 10000

On the Dow Jones support is at 27582, 27311, 26977 area and 26295. Then 24873.. Topping areas 28199 and 29211, these may be safer areas to get into the equity markets on support levels slowly on the accumulation areas.

THE BOTTOM LINE:

The market is up slightly over the last month. The tech sector that has been the stalwart is now cooling off and has broken and closed below its 50 day moving average and has also broken a 5 month trend-line. Further weakness in the NASDAQ and the S&P will happen unless the stock indexes go up on Monday and Tuesday and stay there. If this doesn’t happen quick then traders will start selling pushing this market lower. We are now in seasonal weakness for the stock markets between August and October. With the Election coming up in November more volatility should be at hand. If you are in or nearing retirement and your stock allocation is higher than normal for your goals you may want to rebalance or take a little off the table and reallocate to short term bonds or fixed accounts. I am still longer term Bullish on the market, but shorter term I am concerned about the stock market Trend-lines that are essential to hold. If they don’t hold, then there could be a setback to support the levels stated above. I still like the USA market better than the international one. When the vaccine actually shows promise the market should rebound.

Best to all of you,

Joe Bartosiewicz, CFP®
Investment Advisor Representative
92 High Street
Thomaston, CT 06787
860-940-7020

Charts provided by AIQ Systems:
Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.
Disclaimer: The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, an SEC-registered investment advisor.
Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated with individual professional advice. *There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.
It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.
The price of commodities is subject to substantial price fluctuations of short periods and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated, and concentrated investing may lead to Sector investing may involve a greater degree of risk than investments with broader diversification.
Indexes cannot be invested indirectly, are unmanaged, and do not incur management fees, costs, and expenses.
Dow Jones Industrial Average: A weighted price average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
S&P 500: The S&P 500 is an unmanaged indexed comprised of 500 widely held securities considered to be representative of the stock market in general.
NASDAQ: the NASDAQ Composite Index is an unmanaged, market-weighted index of all over the counter common stocks traded on the National Association of Securities Dealers Automated Quotation System
(IWM) I Shares Russell 2000 ETF: Which tracks the Russell 2000 index: which measures the performance of the small capitalization sector of the U.S. equity market.
A Moderate Mutual Fund risk mutual has approximately 50-70% of its portfolio in different equities, from growth, income stocks, international and emerging markets stocks to 30-50% of its portfolio in different categories of bonds and cash. It seeks capital appreciation with a low to moderate level of current income.
The Merrill Lynch High Yield Master Index: A broad-based measure of the performance of non-investment grade US Bonds
MSCI EAFE: the MSCI EAFE Index (Morgan Stanley Capital International Europe, Australia, and Far East Index) is a widely recognized benchmark of non-US markets. It is an unmanaged index composed of a sample of companies’ representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends.
Investment grade bond index: The S&P 500 Investment-grade corporate bond index, a sub-index of the S&P 500 Bond Index, seeks to measure the performance of the US corporate debt issued by constituents in the S&P 500 with an investment-grade rating. The S&P 500 Bond index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap US equities.
Floating Rate Bond Index is a rule-based, market-value weighted index engineered to measure the performance and characteristics of floating-rate coupon U.S. Treasuries, which have a maturity greater than 12 months.


A Glut of Energy Insider Buyers

Everyone hates the energy sector (Foreshadowing alert: Well, almost everyone).  And a quick perusal of Figure 1 clearly illustrates why the energy sector is unloved. 

Figure 1 – Ticker XLE versus ticker QQQ (Courtesy AIQ TradingExpert)

Since ticker XLE (Energy Select Sector SPDR ETF) topped out in 2014:

*XLE has lost -65%

*QQQ has gained +210%

And in another kick in the head to the energy sector, Exxon (ticker XOM) was just kicked out of the Dow Jones Industrial Average.  Take that, losers!

So yeah, who wouldn’t hate energy stocks and decide to shun them?  Well, as it turns out, the answer to that question of late is “the people who know the energy business the best.”

Figure 2 from www.Sentimentrader.com displays the Insider Buy/Sell ratio for executives and other muckety-mucks running energy related corporations.  The picture speaks for itself.

Figure 2 – Energy Insider Buy/Sell Ratio (Courtesy Sentimentrader.com)

As you can see, energy corporate insiders have been on a massive buying binge of late.  Interestingly, they went on a buying binge in 2019 – apparently expecting an improvement in the sector – then the sector got waylaid by Covid-19.  Instead of bailing out the insiders really kicked their share buying into overdrive as you can see at the far right of Figure 2.

Figure 3 displays ticker XLE with an indicator that I developed by simply smoothing Larry Williams VixFix indicator.  The gist of the idea, is that when this indicator reaches an extreme high level and then turns down, it often highlights a “washed out” situation which may be followed by a bullish move.  Ticker XLE is presently nearing that point. 

EDITTORS NOTE: VixFix smoothed indicator code sections can be copied and pasted into AIQ EDS or you can download the indicator code in an EDS file from here and save it to your /wintes32/EDS Strategies folder.

This indicator is based on another indicator called VixFix which was developed many years ago by Larry Williams.

hivalclose is hival([close],22).  <<<<<The high closing price in that last 22 periods

vixfix is (((hivalclose-[low])/hivalclose)*100)+50. <<<(highest closing price in last 22 periods minus current period low) divided by highest closing price in last 22 periods (then multiplied by 100 and 50 added to arrive at vixfix value)

vixfixaverage is Expavg(vixfix,3). <<< 3-period exponential average of vixfix

vixfixaverageave is Expavg(vixfixaverage,7). <<<7-period exponential average of vixfixaverage

Figure 3 – Ticker XLE with oversold indicator (Courtesy AIQ TradingExpert)

What to make of all this? 

Should savvy investors follow the insider’s lead and start piling into the energy sector?  Unfortunately, hindsight is the only way to know for sure.  But for what it is worth, my own answer is “probably, but maybe not just yet.”

Energy Seasonality

The primary reason for hesitation at this exact moment in time is seasonality.  Let’s use ticker FSESX (Fidelity Select Sector Energy Services) as a proxy for the broader energy index.  This fund’s first full month of trading was January 1986.  Figure 4 displays the cumulative total return for ticker FSESX ONLY during the months of June through November every year since 1986. 

Figure 4 – FSESX cumulative % return June through October (1986-2020)

The cumulative total return during these months for holders of FSESX during June through November is -94.7%(!!!)  So, you see my hesitation with “piling in”.

Additionally – climate change concerns aside – much of the energy industry still revolves around crude oil.  Figure 4 displays the annual seasonal trend by month for crude oil. 

Figure 5 – Crude Oil annual seasonal trend by Month (Courtesy Sentimentrader.com)

Seasonal trends can vary widely from year-to-year, and there is NO guarantee that trouble lies ahead in Sep-Oct-Nov for the energy sector.

But that is what history suggests.

Summary

The bottom line is this:

*Energy sector corporate insider buying should be seen as a bullish longer-term sign for the sector

*The energy sector is so beaten down, battered and unloved that it probably accurate to refer to the situation as “Blood in the Streets”

Based on these factors I look for energy to surprise investors in the years ahead.  That being said:

*Trying to pick the exact bottom in anything is typically a fool’s errand

*Getting bullish on the energy sector in early September is at times fraught with peril.

Sometime around December 1st it will be time to take a close look at the energy sector. If an actual uptrend develops or has already developed, the time may be write for investors to join the insiders.

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

Quick Market update video

The Expert System in TradingExpert Pro gave a 1 – 99 down signal on the Dow Jones on 8-27-20. The market internals based on the advancing vs declining issue in the New York market continue to diverge from the market price action.

The phase indicator used to confirm Expert Ratings turned down on 8-31-20. We usually look for a phase confirmation of an Expert Rating to occur within 3 days of the rating.

The changes made in the constituents of the Dow 30 effective 8-31-20

  • Salesforce.com replaced Exxon Mobil, Amgen replacedd Pfizer and Honeywell replaced Raytheon Technologies.
  • The changes were due to Apple’s 4-for-1 stock split, which significantly reduced the indexes exposure to the information technology sector.
  • The Dow 30 is a price weighted index.

The Bartometer

August 08, 2020

Hello Everyone,

As the COVID 19 Virus bounces back from a lower number a month ago, the stock markets, especially the technology stocks continue to rise. The difference this time is that although cases are rising, the number of deaths is much less proportionately than they were just 3 to 4 months ago. The reason, now the 20 to 49-year-olds are now getting the virus, but because they are generally healthier than the 70 to 80-year-olds, they are beating the virus as their immune system is stronger. The reason the technology stocks are continuing to rally is that people are staying at home and using Apple, Google, Amazon, Tesla, Netflix, Zoon, Docusign, etc.

One somewhat concerning fact is that The Top 15 Stocks in the S&P 500 account in Market Value 35% of the entire S&P 500 stock market. The Bottom 420 Stocks in the S&P 500 account in Market Value 33.8% of the entire S&P 500 stock market. This means that 15 stocks are controlling the entire S&P 500. This troubling skewed market is again showing that a very small number of stocks are making us money and the rest are on their back

  1. It’s mostly technology stocks, large technology stocks. That’s it, other than some special situations. I am still positive on the stock market long term, but the large growth stocks, although still good for the longer term are now fairly valued and could have somewhat of a setback soon. The more aggressive clients are doing well as the aggressive technology stocks represent a bigger percentage of your portfolio than the bonds and dividend stocks. When the vaccine is available and people go back to work and when people feel safe to get back to some semblance of normalcy to make people want to travel, go to a local restaurant or simply to a movie, we could see these value and dividend stocks climb, but until that happens, the technology stocks will most likely dominate the stock markets.
  2. Take a look below, The Dow is down 3%, The Equal weighted S&P 500 is down almost 4%, but the NASDAQ is up 22% because of 15 stocks and the values of their company controlling the entire market including the regular market-weighted S&P only up 5%.

CURRENT TRENDS:

Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until August 8, 2020. These are passive indexes.

Dow Jones -3.0%
S&P 500 +5.0%
EQUAL WEIGHTED S&P 500 -4.0%
NASDAQ Aggressive growth +22%
Large Cap Value -5.0%
I Shares Russell 2000 ETF (IWM) Small cap -9.0%
Midcap stock funds -4.7-15.76%
International Index (MSCI – EAFE ex USA -6.2%
Financial stocks -18%
Energy stocks -36.53%
Healthcare Stocks +2.8% Moderate Mutual Fund Investment Grade Bonds (AAA) Long duration +1.5%
High Yield Merrill Lynch High Yield Index -2.8% Floating Rate Bond Funds -3.4%
Short Term Bond +1.6%
Fixed Bond Yields (10 year) .85% Yield

Classicalprinicples.com and Robert Genetskis Excerpts:

Despite concerns over a weak recovery, the S&P500 reached my estimate of fair value. In contrast, the Nasdaq has far exceeded all prior measures of reasonable valuation. How can stocks rise with the economy so weak? There are two reasons. First, the economy is not weak. It continues to recover rapidly. Second, monetary policy is more expansive than at any time in history.

Although stocks are either fully-valued or over-valued, they can still go higher. At this point, I’m comfortable continuing to ride the wave higher while holding 10% cash for use when the market corrects. Stay cautiously bullish.

Friday’s employment report shows a gain of 1.5 million private-sector workers in early July. The number of unemployed remains high at 16 million. The good news is that weekly unemployment insurance claims continued to improve through the end of July.

The ISM surveys of manufacturers and service companies also show employment contracting. However, these surveys show a strong surge in new orders, which will lead to an ncrease in jobs in August. There are reasons why unemployment remains high. Given the uncertainty over the outlook, it’s natural to await new orders before hiring. Also, employers need to trim unessential costs to pay for the increased costs associated with the virus. Finally, government payments not to work have appealed to many.

Source: Classical Principles.com

S&P 500


Source:AIQsystems.com

The S&P 500 chart is above. It is the Market weighted index described on the first page. Because technology is a major component of this index, stocks like Apple, Amazon, Microsoft and more are making is look
better than what the entire market is doing which is still down 4-10%+ if you look at all stocks.

I tried to make it simple see above. The 3390 area on the S&P 500 is major resistance and 3260, where the Up arrows are should act as support. Right below that is the 50 day moving average. Many traders or investors will sell if the S&P 500 drops and closes below the 50 moving average or the Trend line you see above. Many of you may want to sell if the S&P 500 drops below 3260. In addition the second graph shows the SD-SK Stochastics model as Overbought because the number is over 88. This is another overbought indicator.

Support levels on the S&P 500 area are 3328, 3264, 3150. 3390 is resistance.

▪ These may be safer areas to get into the equity markets on support levels slowly on the accumulation areas.

THE BOTTOM LINE:

The market has rebounded nicely over the last month mainly on the decline in Covid19 cases, and the economy reopening. The NASDAQ has done the best and should continue to do well IF the market continues higher, But now I am thinking that the small to midcap growth and value sector is more undervalued especially when the USA goes back to work and there is a safe and effective vaccine. The Midcap and Small caps could outperform if the rally continues from here. There is a major trend-line right below the markets, see above. If those are broken on a Close I will get Cautious
to Very Cautious. It is important for the trendlines and the 50 day moving to hold or it could start a correction. I like the USA market better than the international market, however the International Emerging markets is getting interesting.

If you have any questions, please call me at 860-940-7020.
Best to all of you,
Joe
Joe Bartosiewicz, CFP®
Investment Advisor Representative

Securities and advisory services offered through SagePoint Financial, Inc. (SPF), member FINRA/SIPC. SPF is separately owned and other entities and/or marketing names, products or services referenced here are
independent of SPF. 800-552-3319 20 East Thomas Road Ste 2000 Phoenix AZ 85012

Charts provided by AIQ Systems:

Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.

Disclaimer: The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, an SEC-registered investment advisor.

Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated with individual professional advice. *There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.

It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market. The price of commodities is subject to substantial price fluctuations of short periods and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated, and concentrated investing may lead to Sector investing may involve a greater degree of risk than investments with broader diversification. Indexes cannot be invested indirectly, are unmanaged, and do not incur management fees, costs, and expenses.

Dow Jones Industrial Average: A weighted price average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
S&P 500: The S&P 500 is an unmanaged indexed comprised of 500 widely held securities considered to be representative of the stock market in general.

NASDAQ: the NASDAQ Composite Index is an unmanaged, market-weighted index of all over the counter common stocks traded on the National Association of Securities Dealers Automated Quotation System
(IWM) I Shares Russell 2000 ETF: Which tracks the Russell 2000 index: which measures the performance of the small capitalization sector of the U.S. equity market. A Moderate Mutual Fund risk mutual has approximately 50-70% of its portfolio in different equities, from growth, income stocks, international and emerging markets stocks to 30-
50% of its portfolio in different categories of bonds and cash. It seeks capital appreciation with a low to moderate level of current income.
The Merrill Lynch High Yield Master Index: A broad-based measure of the performance of non-investment grade US Bonds MSCI EAFE: the MSCI EAFE Index (Morgan Stanley Capital International Europe, Australia, and Far East Index) is a widely recognized benchmark of non-US markets. It is an unmanaged index composed of a sample of companies’ representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Investment grade bond index: The S&P 500 Investment-grade corporate bond index, a sub-index of the S&P 500 Bond Index, seeks to measure the performance of the US corporate
debt issued by constituents in the S&P 500 with an investment-grade rating. The S&P 500 Bond index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap US equities. Floating Rate Bond Index is a rule-based, market-value weighted index engineered to measure the performance and characteristics of floating-rate coupon U.S. Treasuries, which have a maturity greater than 12 months.

Money Flow; The Money Flow Index (MFI) is a momentum indicator that measures the flow of money into and out of a security over a specified period. It is related to the Relative Strength Index (RSI) but incorporates volume, whereas the RSI only considers SK-SD Stochastics. When an oversold stochastic moves up through its MA, a buy signal is produced. Furthermore, Lane recommends that the stochastic line be smoothed twice with three-period simple moving averages: SK is the three-period simple moving average of K, and SD is the three-period simple moving average of SK Rising Wedge; A rising wedge is a technical indicator, suggesting a reversal pattern frequently seen in bear markets. This pattern shows up in charts when the price moves upward with pivot highs and lows converging toward a single point known as the apex


Vitali Apirine’s – The Compare Price Momentum Oscillator (CPMO)

The importable AIQ EDS file based on Vitali Apirine’s article in the August, 2020 issue of Stocks & Commodities magazine, “The Compare Price Momentum Oscillator (CPMO),” can be obtained on request via email to info@TradersEdgeSystems.com.

… Here is a way you can compare at a glance the momentum of two different market indexes or securities in the same chart. It could also be used to help generate trading signals. In this first part of a three-part series, we’ll look at comparing index momentums…

The code is also available here:

!Author: Vitali Aprine, TASC August 2020
!Coded by: Richard Denning, 6/20/20
!www.TradersEdgeSystems.com

!Custom smoothing multiplier: 2 / time period
!PMO line: 20-period custom EMA of (10 × 35-period
!custom EMA of ((Today’s price – Yesterday’s price) / !Yesterday’s price × 100))
!PMO signal line: 10-period EMA of the PMO line

Len1 is 20.
Len2 is 35.
Len3 is 10.
Ticker1 is “QQQ”.
Ticker2 is “SPY”.

C is [close].
C1 is valresult(C,1).
RC1 is (C/C1*100)-100.

custSmoLen1 is Len1 – 1.
custSmoLen2 is Len2 – 1.

CustEma is 10*expavg(RC1,custSmoLen2).
PMO is expavg(CustEma,custSmoLen1).
PMOsig is expavg(PMO,Len3).

Ticker1C is tickerUDF(Ticker1,C).
RC1ticker1 is (Ticker1C/valresult(Ticker1C,1)*100)-100.
CustEmaTicker1 is 10*expavg(RC1ticker1,custSmoLen2).
PMOticker1 is expavg(CustEmaTicker1,custSmoLen1).

Ticker2C is tickerUDF(Ticker2,C).
RC1ticker2 is (Ticker2C/valresult(Ticker2C,1)*100)-100.
CustEmaTicker2 is 10*expavg(RC1ticker2,custSmoLen2).
PMOticker2 is expavg(CustEmaTicker2,custSmoLen1).

CPMO is PMOTicker1 – PMOTicker2.
List if hasdatafor(1000) >= 900.

I coded the indicator described by the author. Figure 10 shows the indicator (QQQ,SPY,20,35) on chart of IWM. When the white line is above the red line on the CPMO indicator, this indicates that the QQQ is stronger than the SPY. Generally, it is considered bullish when the QQQ is leading in strength.

Sample Chart

FIGURE 10: AIQ. The CPMO indicator is shown on a chart of IWM with parameters (QQQ,SPY,20,35).

—Richard Denning
info@TradersEdgeSystems.com
for AIQ Systems

The Stealth Bull Market in “Stuff”

Let’s face it, the human eye is naturally drawn to the “shiny object.”  Hence the reason all the focus is on the Nasdaq Index (by the way, I think there was a glitch with my price quote software yesterday, because at one point it showed that the Nasdaq 100 Index was negative for the day.  I contacted my quote service and pointed out this obvious error and apparently they fixed it because the Nasdaq – as it is supposed to be – was again showing a gain by the end of the day – while all the other indexes were down. But I digress.)

The bottom line is that the type of large-cap/technology related/growth stocks that are presently dominating the Nasdaq 100 Index are (or at least “have”) been the place to be since the market bottomed in March.  Figure 1 displays the performance of ticker QQQ (an ETF that tracks the Nasdaq 100) relative to the performance of the Vanguard Total Stock Market ETF. 

Figure 1 – Ticker QQQ versus ticker VTI (Courtesy StockCharts.com)

The message is pretty obvious, right?  Pile into Apple, Microsoft and Amazon (which account for roughly 34% of the value of the index at the moment) and forget everything else!!! 

Oh sure, if you want to toss in a little Facebook, Google, Tesla and NVIDIA just for “diversification”, that’s OK too.  But avoid “everything else”!

And it’s a great strategy…. Well, as least as long as it lasts.

The “Stuff” Index

Anyway, I created my own index dubbed “Stuff” – it would probably be more accurate to call it the “metals and material” index, but I prefer “Stuff” (sorry, it’s just my nature).  Figure 2 displays a monthly chart; Figure 3 displays a daily chart.

Figure 2 – Jay’s “Stuff” Index; Monthly (Courtesy AIQ TradingExpert)

Figure 3 – Jay’s “Stuff” Index; Daily (Courtesy AIQ TradingExpert)

This index bottomed on 3/18, since then it has climbed +44% (for the record, like everything else it has lagged the Nasdaq 100 which is up +50% over the same time, but it has outperformed all other relevant major stock market indexes).

The index is comprised of the following ETFs:

CPER (copper)

GLD (gold)

LIT (lithium)

PALL (palladium)

PPLT (platinum)

SLV (silver)

URA (uranium)

The top performer among this group since the 3/18 low is LIT which is up +84%.

OK, so this “Stuff” index has still underperformed the Nasdaq Index, so what’s the point?

The Point

Except for gold – which has rallied to a seven year high – no one it seems has the slightest idea that there is “life beyond” large-cap/tech/growth monolith presently sucking up all the sunshine. 

Where do things go from here?  Will Nasdaq keep running?  Or is this rally overdone?  And what about “Stuff”?  Is there any guarantee that it’s strong run will continue?  I don’t claim to have the answers. 

As you can see in Figures 2 and 3, the Stuff Index is presently bumping up against resistance (while the Nasdaq has broken out to the upside and running to new highs).

So here is an interesting rhetorical question to ponder;

First look at Figure 4 which displays the monthly Nasdaq 100 on the top and my Stuff Index on the bottom.

Figure 4 – Nasdaq 100 Index vs. Stuff Index (Courtesy AIQ TradingExpert)

The question to ponder: Which has more upside potential going forward?

See also Jay Kaeppel Interview in July 2020 issue of Technical Analysis of Stocks and Commodities magazine

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

AIQ Market Timing update 6-28-20

Market volatility continues. In this update we’ll take a look at the current AI signals on the Dow Jones. For folks less familiar with our AI engine here’s a recap of what we do.

TradingExpert Pro uses two AI knowledge bases, one specifically designed to issue market timing signals and the other designed to issue stock timing signals.

Each contains approximately 400 rules, but only a few “fire” on any given day.  In the language of expert systems, those rules that are found to be valid on a particular day are described as having “fired”.  

Rules can fire in opposite directions.  When this happens, the bullish and bearish rules fight it out.  It’s only when bullish rules dominate that the Expert Rating signal is bullish, or when bearish rules dominate that the Expert Rating signal is bearish.

The Expert Rating consists of two values. 

The upside rating is the value on the left and the downside rating is on the right.  Expert Ratings are based on a scale of 0 to 100.  An Expert Rating of 95 to 100 is considered a strong signal that the Stock or market may change direction.  

An Expert Rating below 90 is considered meaningless.  A low rating means that there is not enough consistency in the rules that fired to translate to a signal.  The expert system has not found enough evidence to warrant a change from the last strong signal.

Using Relative Strength To Outperform The Market

The importable AIQ EDS file based on Markos Katsanos’ article in the March 2020 issue of Stocks & Commodities, “Using Relative Strength To Outperform The Market,” can be obtained on request via email to info@TradersEdgeSystems.com. The code is also available below.

I coded the indicator described by Katsanos in his article. Figure 5 shows the RSMK indicator with a 90-bar length on a chart of Fire Eye (FEYE). The trading system is also coded.

!USING RELATIVE STRENGTH TO OUTPERFORM THE MARKET !Author: Markos Katsanos, TASC March 2020 !coded by: Richard Denning, 01/13/2020 !www.TradersEdgeSystems.com !RSMK (Relative Strength) Indicator !Copyright Markos Katsanos 2020 
C is [close].
RSBARS is 90.
SK is 3.
SEC2 is tickerudf("SPY",C).

!RSMK:
RSMK is expavg(ln(C/(SEC2))-ln(valresult(C/(SEC2),RSBARS)),3)*100.

!RSMK System:
Buy if RSMK > 0 and valrule(RSMK<0,1) and hasdatafor(200) >= 150.
Sell if {position days} >= 9*21.
Sample Chart

FIGURE 5: AIQ. The RSMK indicator is shown on a chart of FEYE during 2018 and 2019.

—Richard Denning
info@TradersEdgeSystems.com
for AIQ Systems

The Bartometer

June 8, 2020

Hello Everyone,

I hope all of you are keeping healthy and staying safe during this COVID-19 pandemic. Over the last month, we have seen a significant drop in new cases of COVID-19 in most states, but now that most establishments of business have opened, there is some speculation that we may see a rise in COVID-19 cases again.

RECAP:

Over the last month, as COVID-19 cases have dropped, the stock and bond markets have risen dramatically. As of last Friday, however, most of the indexes are still slightly to moderately down. The technology-laden companies in the NASDAQ are the beneficiaries of this “stay at home” policy with returns up 10% this year.

The value sector, which contains the small to midcap companies, banks, energy companies, the retail sector, the airlines, telecommunications, restaurants, and more, are still down by 6-23% for 2020, but are rising dramatically as speculators try to get in now to buy cheap shares. The growth sector has done relatively well, but only a few large companies have contributed.

CURRENT TRENDS:

I continue to like the large tech and health care companies, however, the very large-cap NASDAQ stocks like Apple and Google should start to slow. If the market DOESN’T have a correction in the fall, then we should see the markets continue to recover, then the midcap to small-cap stocks may show a continuation of its upward trend. I am recommending clients move the large-cap growth profits towards the midcap sector somewhat. The Midcaps are down 6.7-11.76% depending on if its growth or value, and particular issues have more of a potential to move upward, in my opinion. A year or two out from this point, I think this sector and the markets should continue the trend nicely higher.

Can it go down from here into the fall and winter if we have a second wave down? Absolutely, but it is an excellent time to add money to your equity side in a diversified portfolio over the next 6 -12 months I like the corporate bond sector better than the government sector going forward. Many people are doubling up their contributions monthly. If you are more than five years before retirement, you may want to think about doing something similar. If stocks are cheap, then isn’t it smart to buy when they are reasonably priced if, over the long term, the market should be higher? But over the short term. I think the markets have risen too fast and over the short-term, I can see up to another 5% more but not much after that. If you are in or nearing retirement, this may be an excellent time to take a little money out of the stock market over the next few weeks.

Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until June 8, 2020. These are passive indexes.

Dow Jones -4.0%
S&P 500 -.50%
EQUAL WEIGHTED S&P 500 -4.0%
NASDAQ Aggressive growth +10%
Large Cap Value -12.5%
I Shares Russell 2000 ETF (IWM) Small cap -9.0%
Midcap stock funds -6.7-11.76%
International Index (MSCI – EAFE ex USA -8.2%
Financial stocks -14%
Energy stocks -23.53%
Healthcare Stocks +1.8%

Moderate Mutual Fund Investment Grade Bonds (AAA) Long duration -2.5%
High Yield Merrill Lynch High Yield Index -3.8%

Floating Rate Bond Funds -4.4%
Short Term Bond +1.1%
Fixed Bond Yields (10 year) .95% Yield

Classicalprinicples.com and Robert Genetskis Excerpts:

Stocks continued to move higher this past week. The major indexes added 2%-3%, while small-cap ETFs led with gains of 4%-6%. The S&P 500 is now within 3% of my estimate of its value. A replay of the failed Occupy Wall Street lawlessness will drive more support for law and order. Rather than hurt Trump, it should help to reelect him. There is also some good news on the virus. Despite the reopening of the economy, active cases have begun declining. Up to now, my expectation that stocks would begin consolidating has not materialized. The stock market assumes my forecast for a rapid recovery will occur without any setbacks. Hope so. Nonetheless, with both cautious state Governors and fed policy paying people not to work, a temporary setback can always arise. Although the market is fully-valued, the outlook for stocks remains mostly bullish.

A Look-Back

Private employment increased by 3 million in May, close to my estimate of 4 million. The rebound was well above the widely predicted loss of 81⁄2 million jobs. Private payrolls remain 18 million less than at their peak in February. Earlier in the week, the ISM business surveys show the economy grew modestly going into early May. The improvement appears to have brought the economy from 80% of its peak performance to 85%. Auto sales went from 50% of normal levels in April to 70% in May. New orders for manufacturing and service companies also improved in May. Orders in May were 30% below their peak compared to 40% below in April. My forecast for job gains in May was based on Weekly insured unemployment claims which were 50% less than the number in April.


Dr. Genetski’s opinion is that every person and circumstance is different. Please call me to address your holistic goals to strategize. There are no guarantees expressed or implied in any part of this correspondence.

Dow Jones

As you can see the Dow Jones is now only down 4% for 2020. I do not see more than a 5% upward move before it is fully valued. There are three resistance points to the left, the first level of resistance is 27424 area, the second is 28404 area, and the third level is the 29000 area. You may be shocked that the market has gone this high. Remember, the stock and bond markets NEVER accommodates the majority of thinking. So when everyone that the markets are going lower it doesn’t, and when everyone it will continue higher it tops out.

The Momentum indicator signal of a BUY is when the pink line crosses above the blue line and a Sell signal is when it crosses on the downside. Currently it still is on the buy side. But it is getting long in the tooth and overbought.

The indicator to the lower left is call the SD-SK Stochastics indicator. When both of the lines go over 88 the market is very overbought and could be setting up for a fall. It is almost very overbought, but not yet.

Summary: I am still long term bullish, but only see the rally to continue for a short period more before I see a flattening or decline of the markets.

NASDAQ QQQ

The true Champ this year again has been the NASDAQ. These stocks include, Facebook, Amazon, Docusign, Paypal, Mcrosoft, Netflix, etc. All of the stocks that benefit by you and your businesses being home. The NASDAQ is now up 10% for the year while everything else in the normal world is down 6-33%. The NASDAQ is now getting a little OVERBOUGHT so I would not go out and buy a bunch of ultra large tech stocks here. In fact, the NASDAQ is right at its high for the year and if I had a lot of my money in the ultra large NASDAQ stocks I would probably redeploy some towards the midcap stocks with go balance sheets and prospects for a bright future. I will also get VERY CAUTIOUS if the NASDAQ closes below the lower trend line currently at the 9505 level. This trend line rises daily so please call me for a strategy session.

The MACD or momentum indicator is still positive, so as long as the trend is up, I am somewhat positive , but it is now getting over bought. Retirees may want to reduce a little at this point.

The SK-SD Stochastics is overbought just like it was in the Dow Jones.
On Balance Volume is showing great conviction. That is a Bullish signal as it has broken to a new high

  • Support levels on the S&P 500 area are 3140, 3070, 2944, and 2796. These might be accumulation levels, especially2649, or 2500. 2936 and 3015 is resistance.
  • Support levels on the NASDAQ are 9675, 9513, and 9326 Topping areas 9845 and 10000  On t
  • The Dow Jones support is at 25245, 24,900, and 23951. Topping areas 27377 and 28419, 29020 and 29561.
  • These may be safer areas to get into the equity markets on support levels slowly on the accumulation areas.

THE BOTTOM LINE:

The market has rebounded nicely over the last month, mainly on the decline in Covid19 cases, and the economy is reopening. The NASDAQ has done the best and should continue to do well IF the market continues higher, the Midcap and Small caps, both growth and value side would probably outperform if the rally continues from here. My thinking is that the market continues to rally a little more, but as the Euphoria continues, I feel the market may stall a little above where we are now. If there is a significant rise in the number of new cases of COVID-19 before any successful treatment or vaccine, then the market would probably selloff, not to new lows but down to a support level listed above. There are trend-lines right below the markets, and if they are broken and close below those areas, then the markets could start a correction again. Trend-lines are essential to hold. If they don’t hold, then there could be a setback to support the levels stated above. I still like the USA market better than the international one.

Best to all of you,

Joe Bartosiewicz, CFP®
Investment Advisor Representative
92 High Street
Thomaston, CT 06787

860-940-7020

Charts provided by AIQ Systems:

Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.

Disclaimer:

The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, an SEC-registered investment advisor.

Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated with individual professional advice.

*There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.

It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.

The price of commodities is subject to substantial price fluctuations of short periods and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated, and concentrated investing may lead to Sector investing may involve a greater degree of risk than investments with broader diversification.




Biotech and Gold Stocks – The Odd Couple

There are a lot of things that don’t make sense these days.  In fact, where would one even begin? So let’s move past all of that and look at something else that doesn’t seem to make sense one the face of it – i.e., the “Odd Couple” relationship between biotech and gold stocks.

The BIOGOLD Index

Using AIQ TradingExpert software I created my own “index” called “BIOGOLD” that simply combines ticker FBIOX (Fidelity Select Biotech) and ticker FSAGX (Fidelity Select Gold).  The index appears in Figure 1.

Editors note: Creating your own index is a function of creating a group list in AIQ Data Manager. Information on creating lists and groups can be found in this PDF on p 11 of 14.

Figure 1 – Jay’s BIOGOLD Index (Courtesy AIQ TradingExpert)

Also included in the lower clip is an indicator referred to as RSI32, which is the 2-day average of the standard 3-day RSI. The levels of 65, 50 and 35 are highlighted in red for reasons detailed below.

The Rules

For the record, I have changed “the rules” a few times over the years.  Call it curve-fitting if you’d like, but the goal is to generate the timeliest signals.  The rules now are as follows:

A “buy signal” occurs when either:

*The RSI32 drops to 35 or below

*The RSI32 drops below 50 (but not as low as 35) and then reverses to the upside for one month

After either of the buy signals above occurs, buy BOTH FBIOX and FSAGX

*After a buy signal, sell both funds when RSI32 rises to 64 or higher

To test results, we will:

*Assume that after a buy signal both FBIOX and FSAGX are bought in equal amounts

*We will assume that both funds are held until RSI32 reaches 64 or higher (i.e., there is no stop-loss provision in this test)

For testing purposes, we will not assume any interest earned while out of the market, in order to highlight only the performance during active buy signals. Figure 2 displays the hypothetical growth of $1,000 (using monthly total return data) using the “system”.

NOTE: All results are generated using total monthly return data for FBIOX and FSAGX, except for May 2020 which is based on price action only (my source of total return data does not update until sometime in June).

Figure 2 – Cumulative hypothetical % growth using Jay’s BIOGOLD System (1986-present)

*The most recent BUY signal occurred at the end of March 2020 when the RSI32 indicator for BIOGOLD closed at 33.67.

*The most recent SELL signal occurred at the end of May 2020 when the RSI32 indicator for BIOGOLD closed at 76.96.

Figures 3 and 4 display the price action for FBIOX and FSAGX during this two-month period.

Figure 3 – Ticker FBIOX (Courtesy AIQ TradingExpert)

Figure 4 – Ticker FSAGX (Courtesy AIQ TradingExpert)

Summary

Is this really a viable approach to investing?  That’s not for me to say.  But it seems to do a pretty good job of identifying favorable times to be in with that “Odd Couple” of biotech and gold. So there’s that…

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.