S&P 500 Index 1839
By Steve Blumenthal
January 15, 2014
The cyclical bull market trend remains in place, the Fed remains supportive and Investor Sentiment remains far too bullish. I continue to favor hedging long-term equity exposure tied to today’s Extreme Optimism.
Included in this week’s update:
- Sentiment Charts – Extreme Optimism Remains: Protect/Hedge Equity Portfolio Exposure
- Cyclical Bull or Cyclical Bear Market Trend Charts – Both Trend Charts Remain Bullish
- The Cyclical Trend for Bonds – Both Trend Charts Remain Bearish
- For Quant Geeks Only – Stock Market Capitalization as a Percentage of Gross Domestic Income
Investment Sentiment charts 1-14-2014:
Sentiment Chart 1 – NDR Crowd Sentiment Poll – Extreme Optimism: Protect/Hedge Long Equity Portfolio Exposure
I recently wrote, “… the investor sentiment reading of 72.9 is the fourth highest reading since 1995. To shout caution is an understatement. Though try telling that to your friend at the cocktail party. One week later (today), investor sentiment remains in the Extreme Optimism zone. Note the market movement at past peak readings (red arrow). A correction remains highly probable.”
If you are a new reader, the gray area highlights the historical market performance when Investor Sentiment, as measured by Ned Davis Research, moves into the Extreme Optimism (Bearish) zone (above the dotted black line or a reading of 66).
Sentiment Chart 2 – NDR Daily Trading Sentiment Composite –Extreme Optimism remains
Cyclical Equity Market Trend Charts – Both Trend Charts Remain Bullish
Cyclical Trend Chart 1 – 13/34-Week EMA – The cyclical bull market’s uptrend remains in place. Note the blue 13-week EMA line remains above the red 34-week EMA line. Also note how well this simple, tactical indicator has historically captured the cyclical bull and bear market trends. Signals occur when the lines cross.
Cyclical Trend Chart 2 – Big Mo continues to signal a bullish uptrend for the market. Note the 84.6% Profitable Long Trades and the Gain/Annum when “Bullish” investing in the S&P 500 Index and the “Switch” to cash on Bearish readings. While no process is perfect, this is a chart I have favored for many years. Keep an eye on this chart.
The Cyclical Bond Market Trend Charts – both trend charts are bearish (interest rates are rising)
10-Year Government Bond Chart
The current 10-year Treasury Note yield is 2.904% (red arrow above). The 13-week EMA is the blue line and the 34-week EMA is the red line. Trend change occurs when the lines cross. Rates are in a rising uptrend. This is bearish for bonds. Upside target is 3.30% then 3.75%. Downside target is 2.25%.
30-Year Government Bond Chart
The current 30-year Treasury Note yield is 3.829% (red arrow). The 13-week EMA is the blue line and the 34-week EMA is the red line. Trend change occurs when the lines cross. Rates are in a rising uptrend. This is bearish for bonds. Upside target is 4.20% then 4.75%. Downside target is 3.40%.
For Quant Geeks Only – Stock Market Capitalization as a Percentage of Gross Domestic Income
With kind regards,
Steve
Stephen B. Blumenthal
Founder & CEO
CMG Capital Management Group, Inc.
Philadelphia – King of Prussia, PA
steve@cmgwealth.com
610-989-9090 Phone
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