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Old_Skeet's Market Barometer ... Spring & Summer Reporting ... and, My Positioning

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  • edited August 2020
    Hi guys.

    Politics aside.

    My perspective (and thinking) on the stock market follow.

    A little more on the barometer that will help explain what is now taking place within the S&P 500 Index which it follows. And, why this might be of concern. Over the past couple of weeks the big ten stocks that make up about 28% of the Index (as a group) have increased in their value while a good number of the underlying stocks have decline in their value. As of last week's market close 79% of the stocks wiithin the Index were trading above thier 50 day moving average and at the close of this week the number had declined to 66%. In addition, over the past two weeks there has been money moving out of the Index according to my money flow indicator, which moved from a reading of 84 to 52.

    So, explain why the Index has moved upward in price over the past two weeks from 3851 (8/7 market close) to 3397 (8/21 market close) and reached a new high. It is very simple, the top ten stocks (as a group) have done most of the heavy lifting to propell the Index to it's new high while a good number of the underlying stocks have been in decline. The rise in the big ten (as a group) has been more than enough to offset the decine in the underlying (as a group) thus the price of the Index moved upward. After all, this is a cap weighted Index.

    In the past, with a decline in money flow along with a good number of stocks moving from above to below their 50 day moving average has often times indicated that a stock market dip (or pull back) is in the making due to a decline in broad based support along with money leaving. This could be because of political convention activity and investors reacting to it by voting with their wallets through the selling of securities. In addition, there was a big increase in short volume in SPY on Friday.

    So, what did Old_Skeet do? Absolutely nothing. I am still with my current asset allocation of 15/45/40 (cash/bonds/stocks). For the past five years (since retirement) I have been reconfiguring my portfolio from a growth allocation type which was as high as 10/20/70 down to the present all weather allocation of 20/40/40 which also affords some good income production. If I were to sell I'd be reducing my paycheck. In addition, I've got ample cash to put some into play during a stock market sell off. Presently, due to low cash yields and streached equity valuations I am overweight in bonds by +5%. For now, though, I'm mostly just sitting and watching.

    Thanks for stopping by and reading.

    Take Care ... Be Safe ... and, Have a Good Weekend!

    Old_Skeet
  • Good morning Old_Skeet: You may have nailed it with your explanation from above.
    Friday's close & my account was flat lined ! 0.00 % gain.
    Better than a -0.4 loss on Thursday.


    Fridays close below

    DJIA
    27,930.33 +190.60 (+0.69%)

    NASDAQ
    11,311.80 +46.85 (+0.42%)

    S&P 500
    3,397.16 +11.65 (+0.34%)

    Russell 2000
    1,552.48 -11.83 (-0.76%

    Have a good weekend , Derf
  • Thanks Old Skeet. Always appreciate your posts.
  • Hi Skeeter,
    Yeah, have looked up SPECX. Looks like a good fund. Will add it to my watch list.
    As far as mid caps....... have been selling them. Down to three funds. Small and mid caps worry me right now. I think things will get worse this fall and winter, so I don't want to own them. I did buy AMFFX....a small watch position. It's the only value fund I own and I'm in no hurry to add.
    As for selling, I sold FEFQX. It was the last tech fund I bought. It had 33% cash, so I got in. Now it has 6% cash. I made good money in a short time period. The fund has a lot of mid tech in it and is way overpriced, I feel. So just took some profits for now.
    I like your thinking this market is way overpriced. I have 17 funds in the portfolio at or nearly at 52-week highs. Have never seen anything like that before. So it would not surprise me to see a pullback. And everybody is going to buy it quickly so I don't think it will last long.
    My biggest fear is evictions and bankruptcies. They're coming like a slow-motion train wreck. It's going to take a while but it's coming. I know I'm repeating this but it worries me.
    Also, told the Dukester you think he's smart. Now he's walking around like he's all that....lol. That's Brown for ya.
    God bless
    the Pudd
    p.s. I'm drinking a longneck now.....


  • Always thorough and easy to read. Thanks, Old Skeet.
  • edited August 2020
    Hi guys ...

    This past week was a strong week for the S&P 500 Index moving from 3397 to 3506 for a weekly gain of 3.26%. The barometer moved from a reading of 125 to 110 on it's near term scale indicating that, according to the matrix of the barometer, the Index is extremely ovebought.

    For me, since I am fully invested within my asset allocation I am presently building cash while I await a better equity buying opportunity. I have thought of adding to my commodity strategy fund but thus far have not. For now I sit.

    Have a good week ... and, I wish all "Good Investing."

    Old_Skeet

  • edited August 2020
    Sorry to go off topic here - but I was trying to post an image & failed. How do I post an image that I have made? Do I need to save it to some photo service? Not even sure what that is.

    Anyway - thanks Skeet for the info.
  • Thanks, Old Skeet. It's a nice problem to have. :)
  • @Old_Skeet: After using your inputs to come up with a barometer reading have you over the years run into the situation that the S&P is in now . That would be with the FAANGS carrying so much weight ? Is it possible to fine tune the barometer for this over weighting ?
    Thanks, Derf
  • edited August 2020
    Hi @Derf,

    My money flow indicator moved from a reading of 52 to 88 this week. As money returned the price of the Index moved upward from 3397 to 3508 for a nice gain of 3.26% with the heavy lifting coming, this past week, mostly from the underlying stocks. At last weeks close there were 66% of the stocks within the S&P 500 Index trading above their 50 day moving average and this week there were 82% as we closed the week. Still as you point out the Big Ten stocks account for about 26% of the Index's valuation as the S&P 500 Index is cap weighted. Should the Big Ten begin to falter ... well, I'm thinking that the underlying will follow. In addition, I'm thinking, the stocks that gained the most will loose the most as investors cut and run booking profits. I'm thinking there are some strong profits to be had with the price runup especially coming from the Big Ten.

    In short answer to your question. The barometer is already tuned as it follows breadth (number of stocks above their 50 and 200 day moving averages and the direction of money flow. A narrow breadth condition is of good concern as well as a outward trend in money flow. With the Big Ten having about a 26% weighting in the Index they have a great deal of influence in the barometer's reading.

    Perhaps, the Democrat and Republican conventions had some influence on the markets over the past couple of weeks. After all, elections are coming and things are beginning to heat up. Will the market melt? Possibly.

    With this, I'm staying within the confines of my "all weather" asset allocation of 20/40/40 (cash/bonds/stocks) + or - 5%. If stocks continue in the updraft I've got plenty of equities invested to enjoy the upward ride; and, if the downdraft comes I've got plenty of cash to do some equity buying. In addition, my portfolio generates a good income stream. So, for now I sit ... and, I await to see how this plays out.

    Derf, your SWAG is probally as good as mine.
  • @Old_Skeet: Thanks for your reply & have a good week !
    Derf

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