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Old_Skeet's Market Barometer ... Winter Reporting ... Market Swoon Updates

2

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  • edited January 2020
    As of market close Friday January 10th, according to Old_Skeet's stock market barometer, the S&P 500 Index is extremely overbought with a reading of 128. This is up two points from last weeks close of 126; however, the Index remains extemely overbought by the metrics of the barometer. During the week the naked short volume has dropped from a weekly average of 60% last week to a weekly average of 45% this week. From a yield perspective I'm finding that the US10YrT is being listed at 1.82% while the S&P 500 Index is listed at 1.81% so there is not much of a yield advantage in seeking income by going either way.

    In closing, there is not much more to write other than stocks have had a very nice run for the 4th quarter of 2019 and on into the new year. This is mostly due to P/E expansion which went from a reading of 16.6 (January 2019) to (current) 20.4 (Blended P/E Ratio) over the past year as investors continue to pay more for corporate earnings. For me stocks are now expensive as represented by the S&P 500 Index; and, I rate the Index a hold due to valuation. At this time, Old_Skeet is not a buyer of the Index and remains invested within his allweather asset allocation of 20% cash, 40% income and 40% equity. I'm also thinking that the Index is in a topping out process with limited near-term upside.

    The next barometer report will be made when there is a change that takes place in the barometer's rating of the Index and/or someting noteworthy comes to surface to write about.

    My three best performing funds this past week were all found in the growth area of my portfolio. They were SPECX +2.61% ... KAUAX +2.00% ... and, AOFAX +1.98%. In comparison, I have the S&P 500 Index, which the barometer follows, up +0.93%.

    Thanks for stopping by and reading.

    Wishing All ... "Good Investing."

    Old_Skeet
  • Glad to read these reports. THANK you.
  • @Old_Skeet. Interesting to see the outperformance by small caps. I imagine your EM holdings also did quite well this week.
  • Hi @MikeW and @Crash,

    Thanks for making comment.

    Mike, interestingly my small/mid cap growth funds were some of the best performers (AOFAX and KAUAX) as noted above while my small/mid cap value funds were some of the worst performers with (NDVAX -1.15% and PMDAX -1.12%). As for my two emerging market funds both were up better than the 500 Index with DWGAX +1.05% and NEWFX +0.97%.

    And, Crash, I'm glad you find value and enjoy reading these barometer reports. Hopefully they are in some way helpful.

    If it were not for the occasional favorable comments, such as yours, that have been made from time to time I'd probally just keep this information to myself and go on about my life. But, because others have provided good quality and informatinal post about what they were doing and seeing in the markets, that have been helpful to me, I make these barometer report post of what I'm seeing in hopes that it helps others.

    Again, thank you for your comments. They are indeed appreciated.

    Old_Skeet
  • Likewise, my (only) small/mid-cap GROWTH (not Value) fund had a helluva good 2019: PRDSX, up over +32%. "And the beat goes on." I have no trouble believing that this Market is tremendously over-bought.
  • @Old_Skeet. I dont always comment but your barometer is one of the top things i look for every week. I always like to see what your reading is and it is helpful to me in planning my own strategy. And you stick by your discipline which is admirable. I think its more important to look at the views your post is getting rather than the comments. Alot of folks like to read but dont comment. Please keep posting
  • @old_skeet, I'm more of an observer than a participant on this site, because I don't feel that I have much wisdom to share -- but you most certainly do, and I always look forward to your barometer and other updates. Thank you for sharing your insights, and "good investing" to you too.
  • edited January 2020
    I thought I'd provide this update since I'll be traveling for the next three weeks (or so) and at times I will not have internet (or cell phone) access.

    As of market close Friday January 24th, according to Old_Skeet's stock market barometer, the S&P 500 Index remains extremely overbought with a reading of 131. This is up three points from the last report of 128. Remember, a higher barometer reading indicates that there is more investment value in the Index over a lower reading. For the week the naked short volume has declined to a weekly average of 50% but has seen weekly averages as high as 60% thus far this year. From a yield perspective I'm finding that the US10YrT is being listed at 1.69% while the S&P 500 Index is listed at 1.79% so there is a slight yield advantage for the stock Index as I write. It is interesting that the VIX has now started to move upward from a low reading of 13 to 16 as we closed the week. Should the VIX reach a reading of 20 (or higher) then I'm looking for some good stock market volitality to set in and we just might get there with the coronavirus concern along with concerns that impeachment proceedings bring. And, don't forget about Brexit and also trouble in the Middle East. Based upon my recent review I compute fair value for the S&P 500 Index to be somewhere around 3180 with strong technical support to be somewhere around 3000. With this, we could see an 8% to 10% (perhaps even more) stock market pullback in its early stages of development since the technicals, that I follow, are softening.

    So, what has Old_Skeet been doing? Up until last week I had been a buyer of fixed income to keep my portfolio somewhat balanced and within it's asset allocation due to the strong run that equities have had of late. Now, starting this week, I'm back to building cash since both stocks and bonds are overbought based upon the metrics of my barometer plus I'll also be traveling (and out of pocket) for the next three weeks, or so. Thank goodness for my "all weather" asset allocation of 20% cash, 40% income and 40% equity as I sense stormy market conditions are approaching.

    Thanks for stopping by and reading.

    The next schedule report will be made in about three weeks when I return so until then I suggest that you "Buckle Up" as I fear a storm is coming!

    Wishing all ... "Good Investing."

    Old_Skeet

  • @Old_Skeet; Looks like you may have hit the nail on the head ! Monday off to a shaky start !
    Enjoy your trip.
    Derf
  • Thx. Bought more qqq and dji index today...don't know what future hold but hopefullybeok in 15 yrs
  • Big hit on 27th Jan, but it's just on paper. I continue my scheduled share purchases of PTIAX at the top of every month. DCA-ing, that way. Took a tiny bite of profit from 2019 out of PRDSX and PRIDX and put that $$$ into PRSNX. Looking at the Big Picture, I still have room to grow my bonds. I'm not up to 60%, yet. (I would be, but Fund Managers have me in a 9% cash position.)
  • edited February 2020
    Hello. I was able to get access while in Panama City, Panama. Doing the math manually old Skeet's barometer scores the Index at about 150 which is fair value. For me I am not yet a buyer as I think we are going lower. Wanting to see 160 plus before I consider any interest in a spiff. The yield advantage goes to the stock index at 1.8 percent vs US10YrT at 1.5.
  • @Old_Skeet; Thanks for the update & hearing from you.
    Derf
  • Panama. Way cool. THANKS for the update observations, @Old_Skeet.
  • edited February 2020
    I've been in the interior (jungle area) for most of the week and often without internet or cell phone access. Now back in Panama City for a couple of days before going up into the mountains.

    I'm without my computer that generates the barometer. With this I'm having to do the math by hand on the main feeds without input from the other data influences. With this I come up with a reading of 140 which produces a barometer reading of overbought for the S&P 500 Index.

    I'm thinking that the market will be more driven by news events more so than from fundamentals and technicals. Although the Index reached a new 52 week high this past week I'm thinking there is a good chance for more downside than continued neartem upside.

    Thanks for stopping by and reading.

    Old_Skeet
  • edited February 2020
    As of market close Friday February 21, according to Old_Skeet's stock market barometer, the S&P 500 Index with a closing valuation of 3338 (down 1.3% for the week) scores as overbought with a reading of 137. For the week the naked short volume averaged 51% and is up from averages for the last two weeks of 42% and 48% respectively. From a yield perspective I'm finding that the US10YrT is being listed at 1.48% while the S&P 500 Index is listed at 1.79% so there is a good yield advantage for the stock Index as I write. The VIX (which is a measure of volitality) has moved upward for the past two weeks from readings of 16 & 14, respectively, to 17. Should the VIX reach a reading of 20 (or thereabout) then I'm looking for some good stock market volitality to set in and we just might get there with the coronavirus concern.

    Based upon a recent review ... I'm still with my call of January 24th as noted in an above post ... where I computed fair value for the S&P 500 Index to be somewhere around 3180 range with strong support to be somewhere around the 3,000 to 3,100 range. With this, we could see an 8% to 10% (perhaps even more) stock market pullback, off the recent 52 week closing high of 3386. This is believed to be because some of the data feeds used in the barometer are softening. I have the Index off its 52 week high by about 1.4%. I consider this a dip and not yet a pullback until the Index is down towards the 5% mark. A 10% decline would be considered a correction and at 15% that would be considered a downdraft. A decline of 20%, or better, would be considered a recession.

    The three best performing funds within my portfolio this past week were FLAAX +0.79% ... SVAAX +0.35% ... and, LBNDX +0.30%. Notice, SVAAX is an all equity fund that invest primarily in good dividend paying stocks while the other two are fixed income funds. In addition, I remain fully invested within the confines of my asset allocation (20% cash, 40% income and 40% equity).

    Thanks for stopping by and reading.

    I wish all ... "Good Investing!"

    Old_Skeet
  • Thank you for your work!
  • @Old_Skeet really valuable and timely update. Thanks a lot Skeet!
  • edited February 2020
    Thx @Old_Skeet..

    Added vanguard lifecycles2045 and vanguard healthcare etf and a energy bond yesterday ytm 5.3%

    The virus wont go away soon I expect tremulous volatile market at least until early_ mid spring
  • beebee
    edited February 2020
    @Old-Skeet

    I cam across these two tables and thought of your barometer reading.

    Wondering if it might be of some service until you can crunch your personnel data:

    https://screencast.com/t/aEu5meDi

    and,

    https://screencast.com/t/9YXdTRKMj7G7

  • edited February 2020
    Hi @bee, Thank you for the links. The barometer uses a blended approach and utilizes both forward estimates and trailing earnings for it's earnings data. In this way, it gives credit for what stocks have done over the past twelve months (TTM, trailing twelve months) and what they are projected to do over the next twelve months (FE, forward estimates). According to the WSJ the S&P 500 Index as of 2/21/2020 was trading on forward estimates (FE) on a P/E Ratio of 19.27 and on a trailing twelve months (TTM) Ratio of 25.82. This puts forward earnings (FE) at $173.22 and trailing earnings (TTM) at $129.28 based upon Friday (2/21/2020) closing of 3338. That is quite a diference from what the Index has actually done compaired to what the Index is projected to do. On a blended approach I use a ratio of 20 as being plenty in this low interest rate environment. As you may have guessed ... the blended number is well above 20 at 22.07. And ... then there is another source of earnings for the Index that comes from Standard & Poors that has TTM at $141.75. Using the S&P number within the blend computes to a P/E Ratio of 21.49. When compaired to the 20 as being plenty this puts the Index at a little better than a seven percent premium. But, that is not all ... as there is more data that is considered and that is why Old_Skeet uses a computer that computes all the data feeds into to a derived number that gets scaled to produce a barometer reading.

    I could continue ... but, that just open a can of worms for more discussion. Let's just say that the rest of the barometer considers other data inputs beside earnings to produce its reading with the other two majors ones being a breadth feed along with a technical score feed. Again, other data influences are used as well.
  • edited February 2020
    With Monday's stock market swoon I thought I'd post an update on the barometer. With the S&P 500 Index closing with a valuation of 3226 puts it off its 52 week closing high by 4.7% and down for the day by about 3.4%. With this, more investment value has now moved into the Index as the barometer reading has moved from a reading of 137 to 146 which is borderline between overvalued and fair value on the barometer's scale. I'm thinking that this decline, in the Index, is due in good part to a softening of projected forward earnings estimates. When I can get a handle on revised forward estimates I'll make another post. Hopefully, I'll have something by the end of the week. For Old_Skeet to become a buyer of equities, in the near term, I'm going to need to see a higher barometer reading somewhere in the high 150's to low 160's (or better).

    I remain fully invested within my asset allocation of 20% cash, 40% income and 40% equity. Thus far, I have not reached my rebalance threshold which is +(or-) 2% from neutral asset weighting for my income and equity areas while I generally let cash float. Yesterday, my equity allocation weighting dropped by 0.6% while my income area weighting increased by 0.3% and the cash percentage weighting rose a little, as well, by 0.2%.

    For now, I'm not doing much except listening to the talking heads describe market action on CNBC. I sure do miss the Nightly Business Report as it provided a nice daily market recap.
  • edited February 2020
    With Tuesday's continued stock market swoon I thought I'd post an update on the barometer. With the S&P 500 Index closing with a valuation of 3128 puts it off its 52 week closing high by 7.6% and down for the day by about 3.0%. With this, more investment value has now moved into the Index as the barometer reading has moved from a reading of 146 to 156 which is in the undervalue range on the barometer's scale. Remember, a higher barometer reading indicates there is more investment value in the Index over a lower reading. I'm thinking that this decline, in the Index, is due in good part to anticipated softening of forward earnings estimates and has now moved from a dip into a pullback stage but has yet to reach a correction.

    I've yet to reach my portfolio's rebalance threshold. And, thus far, I'm pleased with my portfolio's performance during this stock market swoon which is now in a pullback stage (down 5% to 10%). Not yet needing to add equities to my asset allocation mix I'm just sitting and watching. However, I just might be opening an equity spiff (special investment) position soon.

    Thanks for stopping by and reading.

    I wish all ... "Good Investing."
  • My bonds, I suppose, have kept me from those kind of losses you mention as a "pullback." I'm down about -2.5 percent so far. No panic here, and my PTIAX is doing quite nicely. RPSIX, less so. PRSNX is just kinda holding its own.
  • edited February 2020
    With today's market decline in the S&P 500 Index, with a 12 point drop, I thought I make another post. Not much changed in the barometer reading which moved from 156 to 158 and remains in the undervalue range on the barometer's scale. One of the things that I did today was I bought a little around the edges in a couple of equity funds (good dividend payers) but nothing major. I'm still seeing good support in the 3,000 to 3,100 range for the Index and we are not far from reaching this range with today's close of 3116 which is about 8% off its closing high of 3386. For some reason if we blow through the 3,000 to 3,100 support then the next support I'm seeing lies between 2,800 to 2,900 range putting the Index in a downdraft, which is a decline of 15% to 20%, but short of a recession which is a decline of 20% which would then put the Index at a little below the 2710 mark, if reached.

  • edited February 2020
    With Thursday's 137 point decline in the S&P 500 Index I thought I'd make another daily post. A good bit has changed in the barometer's reading as it moved from a reading of 158 to 170 indicating that the Index is now extremely oversold. Remember, a higher barometer reading indicates that there is more investment value in the Index over a lower reading. Today, the Index moved from yesterday's close of 3116 to a close today of 2979, for a 4.4% decline. With this, I am now seeing the next level of support to lie somewhere between the 2800 to 2900 level. From the Index's 52 week closing high of 3386 to today's close of 2979 results in a 407 point (12%) loss. This now puts the Index into correction territory.

    I'm thinking that the 2710 mark is an important mark to remember. Should the Index decline to this level then that would be considered recessionay and put the Index into bear market territory.

    I did not do any buying today since I bought a little yesterday. Should the Index be down again tomorrow (Friday) I'll probally do a little buying somewhere in the growh area of my portfolio thinking traders are not going to want to carry long positions over the weekend and the selling pressure will continue. Inspite of all this market carnage that has taken place I am pleased with how my portfolio has performed being down from its 52 week high by 4.1%. This is in line with my hybrid income sleeve. The two best performers within this sleeve are CTFAX which is off its 52 week high by 2.92% and APIUX, which is off a little more, at 2.95%.

    Thanks for stopping by and reading.

    I wish all ... "Good Investing."
  • Read somewhere (WSJ?) that the gate is wide open if 3k resistance level is broken . Appears that happen today.
    Derf

  • "I am now seeing the next level of support to lie somewhere between the 2800 to 2900 level."

    Nice call. It will be very interesting to see where we go from here, especially if a substantial number of CV19 cases start developing here in the US.

    I'm not too certain about taking advantage of this drop since I'm 80, but if I were even 10 years younger I'd be ready to buy big time.
  • edited February 2020
    Nice upward bounce just before closing today. Suggests calculated buying/selling... no "panic", at least for now. Putting Pence "in charge" (at least in charge of official gov't "information" releases) seems to have done the trick in restoring confidence.

    Or maybe the uptick is simply due to Mick Mulvaney pointing out that the mainstream media is "exaggerating the seriousness of coronavirus because 'they think this will bring down the president, that’s what this is all about.' ”

    For some reason I hadn't thought about the situation in exactly that way.

    :-O
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