The importable AIQ EDS file based on Vitali Apirine’s two-part article, (“Moving Average Bands,” part 1, July 2021 issue, and “Moving Average Band Width,” part 2, August 2021 issue) in Stocks & Commodities magazine can be obtained on request via email to info@TradersEdgeSystems.com. The code is also shown below.
Vitali presents moving average bands (MAB), an indicator based on the distance between the bands. MAB width lines can foreshadow strong market moves or a change in trend…
!Moving Average Bands !Moving Average Band Width !Author: Vitali Aprine, TASC July & Aug 2021 !Coded by: Richard Denning, 6/14/2021 !INPUTS: Len1 is 50. Len2 is 10. Mult1 is 1. C is [close]. MA1 is expavg(C,Len1). MA2 is expavg(C,Len2). MAdiff is MA1 - MA2. DV is sum(MAdiff*MAdiff,Len2) / Len2. Dev is sqrt(DV)*Mult1. MABup is MA1 + Dev. MABmid is MA1. MABdn is MA1 - Dev. MABW is (MABup - MABdn) / MABmid * 100. LowMABW is lowresult(MABW,Len1).
Figure 13 shows the MAB and MABW indicators on a chart of Apple, Inc. (AAPL).
FIGURE 13: AIQ. This shows the MAB and MABW indicators on a chart of Apple, Inc. (AAPL).
The markets continue to rise to the 4420 level and surpassing the target of 4400 I had for the S&P 500. Earnings are coming in better than expectations for the most part and stocks are following earnings.
There are two things that make stocks rise, Earnings and Interest rates:
• If earnings are rising faster than expectations and rising 5-10%+ per year, then the markets should follow the rise in earnings, because the value of the company is based on what it earns over time.
• If interest rates stay low, then companies and consumers can borrow money at a low rate and invest. In addition, low interest rates let people afford houses and other larger purchases. With lower interest rates there is minimal competition for any other type of investment, like CD’s or money funds attracting people to them. There are few choices, that it why stocks are one of the only choices in which to invest. When interest rates rise to the 3 to 5% there is more competition away from stocks and more towards higher fixed rate bonds, CD’s, and money funds. Now that interest rates for the 10 year bond is 1.15% and money market rates are 0 to .5 of 1% people gravitate toward the stock market and real estate. That is the one of the main reasons the markets are high and could stay high as long as earnings grow, and interest rates stay relatively low. Over time the equity market continues to grow as earnings grow. THINK LONG TERM!
Seasonally and historically, August to October are not good times for the markets. August has been a time where the markets have “Topped Out” and start a decline toward a low in October. “Throughout the month of July, investors had been singing ‘Summertime, and the livin’ is easy,'” with the S&P 500 posting seven all-time highs, Sam Stovall, chief investment strategist at CFRA, wrote in a Monday note. “Unfortunately,” he added, the month of August “has a reputation for disappointing investors. “He notes that since 1945, “the S&P 500 posted its third-worst average monthly return, and third most volatile performance, in August. To make matters worse, while the S&P 500 was higher 55% of the time in August, that batting average fell to only 35% following the 23 years in which the S&P set one or more new highs in July. And to add insult to injury, following the 13 Julys that set six or more new all-time highs, the S&P 500 declined an average 2.4% in August, and fell in price 12 of 13 times.”
Source: Fortune
Dr. Robert Genetski’s excerpts from ClassicalPrinciples.com
Market Outlook
Stocks moved broadly higher for the second straight week with all major indexes hitting all-time highs. Small caps also advanced, but remain 4%- 5% below their highs.
Stocks keep moving higher, behaving like the little engine that could. They are reaching a point above their 50-day average which often leads to at least a short-term correction. However, unprecedented monetary ease should continue to limit any downward correction.
Business surveys show July business activity continued to increase at a rapid rate. This raises the odds total spending (GDP) will grow at double-digit annual rates for the third consecutive quarter.
Investors ignored concerns surrounding Covid. As with the flu, Covid and its offspring variants will be with us for a while. Recent data from the US, Israel and the UK suggest the vaccine is not working as well as expected. Moderna appears to confirm this by announcing vaccinated people might need a booster after six months. Chaching!
The good news is the Association of American Physicians & Surgeons (AAPS) have very treatments for Covid, if begun in the early stages.
Unfortunately, the CDC, NIH continue to ignore the AAPS advice. They claim their job is to advise on limiting the spread of the disease, not providing medical advice.
In spite of the potential for a setback in stocks, equity portfolios should continue to maintain a relatively large percentage of stocks. With historically low interest rates, stocks remain very attractive.
A Look Back Today’s employment report shows July private payrolls rose by 703,000. In spite of the surge in jobs over the past six months, payrolls remain 4% below their pre-Covid peaks. The increase in jobs helped drive the unemployment rate down to 5.4%.
Listed below are some of the INDEXES for both the equities and interest rate markets. The source is Morningstar.com
Dow Jones +16.16% S&P 500 +19.1% EQUAL WEIGHTED S&P 500 +17.2% NASDAQ Aggressive growth +16% Large Cap Value +16% I Shares Russell 2000 ETF (IWM) Small cap +14% Midcap stock funds +17% International Index (MSCI – EAFE ex USA +9.4% International Emerging Markets +.90% Financial stocks +29% Energy stocks +33% Healthcare Stocks +17% High Yield Merrill Lynch High Yield Index +2.5% Gold -5.2%
CHART SOURCE:AIQSYSTEMS.COM
Above is the S&P 500. As you can see, it continues to rise on a Left to Right Pattern. Last month I said if it drops below the trend-line and the 50-day moving average on a close I would get very cautious. It went right to the 5o day moving average 30 minutes prior to the close and rallied 150 points to close nicely above the 50 day moving average and the trend-line. See the arrow My computer models are still flashing Sell signals which have not been confirmed, so this is a watch and wait and realize I might sell for many of you where I am the Fiduciary on the account. August to September is usually a tough time for the market.
If the trend-line or the 50-day moving average is broken on the close I will again become very cautious.
The chart below the market is money flow and that looks good. It shows that money is still going into the market
The next chart shows that the volume as the market is rising is going up on low volume. That is not great.
The chart on the bottom is called “On Balance Volume” and it confirms the upside of the market index if it were hitting a new high like the market has. As you can see it is not doing that as of Friday. So this is a Caution.
Overall, we could have a little correction from now till October. Watch the trend-lines and the 50 day moving average for a break on the close of the day.
Support levels on the S&P 500 area are 4370, 4315, 4300, and 4256. These may be safer areas to get into the equity on support levels slowly on the accumulation areas.
THE BOTTOM LINE:
I am still relatively Bullish on the market, but as you can see above, the market is getting overvalued and August through October are seasonally weak for the market. My target of 4400 on the S&P 500 is pierced on the upside. At this point it could correct very soon then rally to the 4500+ by the end of the year after a little setback. The Value sector of the market and the mid and large value sectors are now fairly valued. Over the longer term, technology, up about 16% should perform the best. Trendlines are very important. At this point, I would not want to see the level broken convincingly on a close. That would make me get very cautious. Best to all of you,
Joe Bartosiewicz, CFP®
92 High Street
Thomaston, CT 06787
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
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.
AIQ TradingExpert Pro includes a Portfolio Manager that allows you to apply exit strategies to your open position, manage and balance your portfolio, and run analysis against benchmark indices.
Included in the Portfolio Manager is the Simulator tool where you can take a trading strategy and test it in real-life simulation. Once you’ve found a strategy that meets your goals, the Pick-of-the-day tool will tell you each day which stocks meet your strategy rule for trading.
“AIQ offers the ability to do a quick review of portfolios on demand is extremely helpful in managing stock portfolio’s – getting trading signals each day provides a great tool to get in front of opportunities or future problems. AIQ provides an ideal tracking system to manage assets; and that is why I have been a subscriber for 25 years. “Patrick Buffa
On my Bartometer in December, I thought the S&P 500 would reach 4200 to 4400 this year. The S&P is now at 4369. Am I worried that we are getting close to my target? Yes and no. Yes, if the Covid 19 Delta Variant starts to progress and yes IF the market breaks below a 10-month trend-line. Otherwise, I am still relatively bullish on the market that can continue higher as earnings continue to come in better than expectations. One Caution, my computer models again flashed a Daily, Short term SELL signal that is not confirmed. That means to watch the trendlines for a break to see if it confirms on the downside.
The stock markets continue to edge higher, confounding many analysts, and logically the market should not be higher now than it was when the economy was booming in 2019. The markets are defying logic and normal metrics of price to earnings and other metrics of valuation as it sees more growth ahead. The market usually rises over the long term based on Earnings and Interest Rates and now Earnings are great, and Interest Rates are low. This is a perfect scenario for the stock market. The valuation of the stock market is that it is 25% over valued, but earnings are coming in better than expectations, so targets are being raised higher. The Federal Reserve is also injecting liquidity and keeping rates low.
The fundamentals of the economy are good, although slowing slightly. I am still relatively positive unless 4200 to 4224 on the S&P doesn’t hold and we have a decisive Selloff. See the graph and explanation on third page.
House prices continue to inch higher. In my opinion, the real estate market will inch higher until the economy slows, or interest rates go over 3.5% on the 15 year and 3.9% on the 30 year. Right now, it still is a Sellers’ market, this soon will slow.
The energy market still looks good, as noticed by the gas prices and if interest rates rise soon then the financial sector which sold off over the last couple of weeks should turn around to the upside. If the stock market sells off from here, you may want to add more to your stock portfolio, if you have a longer-term horizon. Please call me for guidance in the allocation of your 401(k) and a strategy meeting with me if you have not spoken to me in 6 months. I have been liking the Value sector over the last 7 months, now the growth sector, is starting to look better for purchase.
Some of the INDEXES of the markets both equities and interest rates are below.
Dow Jones +14.99% S&P 500 +17.1% EQUAL WEIGHTED S&P 500 +16% NASDAQ Aggressive growth +15% Large Cap Value +14% I Shares Russell 2000 ETF (IWM) Small cap +15% Midcap stock funds +15% International Index (MSCI – EAFE ex USA +9.4% International Emerging Markets +7.5% Financial stocks +25% Energy stocks +42% Healthcare Stocks +14% High Yield Merrill Lynch High Yield Index +2.1%
Floating Rate Bond Funds +2.61% Short Term Bond +.6% Multi sector bond funds +1.9% Gold -5.2%
10 year Bond Yield 1.3 Moderate Fund +8.7%
Average Disruptor Fund Aggressive growth -2%
Moderate Mutual Fund Investment Grade Bonds (AAA) Long duration -1.86%
Classicalprinciples.com and Robert Genetskis Excerpts
Market Outlook
Stock prices were mixed this past week. The Nasdaq 100 hit an all-time high Wednesday, fell 1⁄2% yesterday and ended the week up just over 1%. The Nasdaq was up slightly and the S&P500 and Dow were down slightly. Small caps lost 4%.
Good news on the economy continued. June business surveys show both manufacturing and service companies growing rapidly. Weekly employment data show the job market improving.
Monetary policy remains expansive. Monthly data from the Fed show the central bank purchased $172 billion in securities in June. How expansive will depend on how much of the new money banks have left at the Fed. That bank data won’t be released until later this month.
The economy has a lot of momentum. Strong surveys for new orders indicate rapid growth will continue at least through the summer and fall. Longer-term interest rates continue to behave as if inflation will not be a problem. The 10-year Treasury Note is down to 1.29%. In real terms, bonds provide significant negative returns.
Long-term interest rates remain well below their fundamental levels. As inflation becomes more apparent, the risk of holding longer-term bonds will also become more apparent.
A Look Back
The ISM business survey for service companies followed the Markit survey. Both surveys show service company activity remained strong in June, but not as strong as May’s hectic readings. With service business activity at 60 and new orders at 62, the service sector remains healthy.
As with manufacturing companies, the indicator for employment in the service sector was close to breakeven. The weakness in job growth from the business surveys is not consistent with the large increase in jobs from the payroll data.
The S&P 500 is above. As you can see the index continues to rise in a nice channel pattern. Some may say it is a Rising Wedge as well. If you notice, the Trend-line and the 50 day moving average is supporting the upward trend. This means that the longer the trend holds, the more it falls if it breaks the trend. So, in this instance the 4200 to 4224 area or the trendline better hold on a close of the market. I do not want to see the S&P sell off and break the 50 day moving average or the Trend-line decisively. That could cause sellers to finally start selling the rallies and not buy the dips or sell offs.
The next indicator is the MACD or momentum indicator. When the pink line breaks to the upside above the blue line it is positive like now.
The SK-SD Stochastics line is overbought when it is over the 96 like it is now.
The indicator below is the RSI wilder Index. When it is over 70 it is considered overvalued and overbought. It is now.
On Balance Volume is an indicator showing volume and conviction of the move higher. It is not breaking out to new highs, showing me that the market is going up on lower volume.
Overall, the markets are getting flash Sells not confirmed, it means to reduce a little equity and to rebalance and watch the support levels so they are not broken.
Support levels on the S&P 500 area are 4250, 4200, 4050, and 3950. These may be safer areas to get into the equity markets on support levels slowly on the accumulation areas.
THE BOTTOM LINE:
I am still relatively Bullish on the market, but as you can see above, the market is getting overvalued. My target of 4400 on the S&P 500 is quickly approaching. The Value sector of the market and the mid and large value sectors are now fairly valued. Over the longer-term, technology, up about 15% should perform the best. Trendlines are very important. At this point, I would not want to see the 4200 to 4224 level broken convincingly on a close. That would make me get very cautious.
Best to all of you,
Joe Bartosiewicz, CFP® Investment Advisor Representative
92 High Street Thomaston, CT 06787
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
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.
The importable AIQ EDS file based on Markos Katsanos’ article in July issue of Stocks & Commodities magazine, “Buy & Hold, Or Buy & Sell?” can be obtained on request via email to info@TradersEdgeSystems.com. The code is also available below:
Synopsis….Here is a system that with a few simple rules will reduce drawdown and improve the profitability of your portfolio without having to go short or use put options…
!Buy & Hold, Or Buy & Sell?
!Author: Markos Katsanos, TASC July 2021
!Coded by: Richard Denning, 5/17/2021
C is [close].
C1 is valresult(C,1).
H is [high].
L is [low].
LL3 is lowresult(L,3).
HH3 is highresult(H,3).
LL14 is lowresult(l,14).
HH14 is highresult(H,14).
LL40 is lowresult(L,40).
HH40 is highresult(H,40).
V is [volume].
WilderLen is 2.
ATRlen is WilderLen*2-1.
VIX is TickerUDF("VIX",C).
VIXDN is (VIX/highresult(VIX,15,1)-1)*100.
VIXUP is (VIX/lowresult(VIX,15,1)-1)*100.
VIXDNMIN is -30.
VIXUPMIN is 100.
! AVERAGE TRUE RANGE
HD if hasdatafor(ATRlen+20) >= ATRlen.
TR is Max(H - L,max(abs(C1 - L),abs(C1 - H))).
ATR is iff(HD,expavg(TR,ATRlen),0).
ATRDN is (ATR/highresult(ATR,15,1)-1)*100.
ATRUP is (ATR/lowresult(ATR,15,1)-1)*100.
UP is (highresult(C,2)/lowresult(C,4)-1)*100.
DN is (lowresult(C,2)/highresult(C,4)-1)*100.
CCH is (lowresult(C,10)/highresult(C,100)-1)*100.
HHB is scanany(C=^highresult(C,4),4) then offsettodate(month(),day(),year()).
VOLUP is V/simpleavg(V,50,HHB-1)*100.
LLB is scanany(C=^lowresult(C,4),4) then offsettodate(month(),day(),year()).
SMA10 is simpleavg(C,10).
BUYINITIAL if SMA10 >= valresult(SMA10,1)
AND StochK3 < 40
AND hasdatafor(20)>=10.
B2 if UP > 6
AND (VIXDN<VIXDNMIN OR ATRDN<2*VIXDNMIN)
AND CCH<-15
AND lowresult(StochK40,^LLB)<25
AND lowresult(StochK14,^LLB)<25
AND StochK14>=StochK40.
Buy if BUYINITIAL or B2.
SELL if C<simpleavg(C,20)
AND DN<-6
AND (VIXUP>VIXUPMIN OR ATRUP>2*VIXUPMIN)
AND VOLUP>80 AND highresult(StochK40,^HHB)>85
AND highresult(StochK14,^HHB)>85
AND StochK40>=StochK14.
Stoch3 is (C - LL3) / (HH3 - LL3) * 100.
StochK3 is simpleavg(Stoch3,3).
Stoch14 is (C - LL14) / (HH14 - LL14) * 100.
StochK14 is simpleavg(Stoch14,3).
Stoch40 is (C - LL40) / (HH40 - LL40) * 100.
StochK40 is simpleavg(Stoch40,3).
ShowData if 1.
Figure 7 shows a backtest of the weekly system using the Nasdaq 100 list of stocks from 5/17/1999 to 5/17/2021.
FIGURE 7: AIQ. Shown here is a summary of the EDS weekly backtest using the Nasdaq 100 list of stocks from 5/17/1999 to 5/17/2021.
