The Relativity Report

From the archives of Systematic Relative Strength:

Perhaps no investment method better exemplifies the Zen virtue of simplicity than relative strength. You do not need a complicated, multi-factor quant model to use relative strength. You need only one piece of data—price—and a robust measurement of performance. Then, buy what is performing and hold it until it is no longer performing. Simplicity.

The full post is here and well worth a read for those of you interested in relative strength, tactical, or momentum-based investing.

The strategies edged lower again this week. Intermarket Matrix fared best with a 0.39% loss. Market Cap Blend gave up 0.52% and Sector Switch retreated 0.63%. Our broad US equity measure, meanwhile, fell 0.98%.

It was another quiet week across Relative Strength matrixes, where we saw five RS chart changes (see Intermarket Matrix, Market Cap Blend) and one RS signal reversal (see Market Cap Blend). Ten charts ended the week on signal reversal alert (see Market Cap Blend).

At the portfolio level, there were no position changes or dividend distributions to report.

Below, we detail all holdings, past-week position returns, fund standings and past-week fund returns on a strategy-by-strategy basis. We also break down the above-mentioned chart changes, signal reversal and signal reversal alerts.

(more…)

The strategies finished mostly lower this week. Sector Switch was our only winner, with a 1.00% gain. Market Cap Blend shed 0.11% and Intermarket Matrix slipped 0.47%. Our broad US equity measure, meanwhile, rose 0.83%.

Activity was subdued across Relative Strength matrixes this week, where we recorded just six RS chart changes (see Intermarket Matrix). Another 12 RS charts ended the week on reversal alert (see Market Cap Blend).

At the portfolio level, there were no position changes. There were, however, two dividend distributions to report (see Intermarket Matrix, Sector Switch).

Below, we detail all holdings, past-week position returns, fund standings and past-week fund returns on a strategy-by-strategy basis. We also break down the above-mentioned dividend distributions, chart changes and chart reversal warnings.

(more…)

From a recent post by Robert P. Seawright on the lure of complexity:

As always, investing is really hard. It is therefore imperative to keep things as simple as possible but no simpler. We should resist complexity for its own sake. Proper default settings and a data-driven approach are vital. The markets aren’t tuned. They are a boisterous cacophony of competing forces and interests. If we are to succeed, we need to keep things as simple as possible, but no simpler.

HT: Abnormal Returns

IEF (Mid Term Treas) has flashed a double bottom breakdown, flipping its chart signal from bullish to bearish for the first time since February of 2011. The preliminary downside price target is 100.

Remember, falling bond prices equate to rising interest rates. Higher rates in turn often pose headwinds to income-generating securities such as REITs and utility stocks. That fact goes a long way toward explaining the very poor performances turned in these past two weeks by Intermarket Matrix. If bond prices continue to falter, expect to see some signal activity from that strategy in coming days/weeks.

For a second straight week the strategies finished collectively lower. Market Cap Blend fared best with a tame 0.26% loss. Sector Switch slipped 1.15% and Intermarket Matrix plunged another 3.92% on faltering US bond prices. Our broad US equity measure, meanwhile, fell 1.13%.

It was another fairly active week across Relative Strength matrixes, where we picked up 15 RS chart changes (see Intermarket Matrix, Sector Switch). Ten charts ended the week on reversal alert (see Market Cap Blend).

At the portfolio level, there were no position changes or dividend distributions to report.

Below, we detail all holdings, past-week position returns, fund standings and past-week fund returns on a strategy-by-strategy basis. We also break down the above-mentioned RS chart changes and chart reversal warnings.

(more…)

The strategies snapped a four-week winning streak in some style this week amid increasing prospects of an end to US central bank stimulus. Sector Switch slipped 1.15%, Market Cap Blend 1.88%, and Intermarket Matrix a very steep 3.05%. Our broad US equity measure, meanwhile, ended 0.98% lower.

It was a fairly active week across Relative Strength matrixes, where we registered nine RS chart changes (see Intermarket Matrix, Sector Switch) and one chart reversal (see Sector Switch). Another nine RS charts ended the week on reversal alert (see Market Cap Blend).

That activity was not enough to trigger changes at the portfolio level, however, and there were no dividend distributions to report.

Below, we detail all holdings, past-week position returns, fund standings and past-week fund returns on a strategy-by-strategy basis. We also break down the above-mentioned chart changes, chart signal reversal and chart reversal warnings.

(more…)

The chart above was lifted from a recent Pragmatic Capitalism post in which author Cullen Roche suggests that professional portfolio managers are no less susceptible to cyclical strategic biases than the average investor. Says Roche:

I get a kick out of watching how the cycle of emotions never changes over time. If there’s one guarantee in the markets it is that people respond to the same environments with the same cyclical thought process. And it’s funny to see how some portfolio managers think they’re immune to it. As if only the guy on the street is vulnerable to the rollercoaster ride of emotions. But nothing could be further from the truth.

Although the financial crisis might feel like it was a lifetime ago, the cycle of various strategic approaches to this market is fresh on my mind. We all know the cycle of emotions. You tend to feel euphoric at the peak, panicked at the trough and generally confused all the way inbetween. Don’t worry – portfolio managers are no better. They just express their emotions in varying degrees of active portfolio management with fancier sounding ways to express the rollercoaster ride they’re on.

This is great commentary that, in my opinion, ties in well with March’s short piece on David Varadi’s findings. To re-quote Varadi:

…there is no uniform winning strategy in all market conditions. Each strategy has a particular regime in which is it likely to shine.

Right then. Get that through your skull, and then find and stick with a proven investment approach (or two), regardless of what your hear from pundits and portfolio managers. You’ll be a happier, more relaxed, and very likely more successful investor for your troubles…

HT: Abnormal Returns

For a fourth straight week the strategies ended collectively higher. Market Cap Blend again led, this week with a 1.94% gain. Intermarket Matrix added 1.26% and Sector Switch tacked on 1.06%. Our broad US equity measure, meanwhile, rose an impressive 2.16%.

It was an active week across Relative Strength matrixes, where we saw 22 RS chart changes (see Intermarket Matrix) and one chart signal reversal (see Intermarket Matrix). Ten RS charts ended the week on reversal alert (see Sector Switch, Market Cap Blend).

At the portfolio level, there were no position changes or dividend distributions to report.

Below, we detail all holdings, past-week position returns, fund standings and past-week fund returns on a strategy-by-strategy basis. We also break down the above-mentioned chart changes, chart signal reversal and chart reversal warnings.

(more…)

The strategies ended higher across the board again this week. In what’s becoming a familiar pattern, Market Cap Blend led, this time with a 2.62% gain. Sector Switch was second best, adding 1.69%. Intermarket Matrix trailed the pack but still managed to tack on 0.91%. Our broad US equity measure, meanwhile, rose 1.26% and touched (you guessed it) another all-time high.

Things perked up a bit across Relative Strength matrixes, where we counted eight RS chart changes on the week (see Intermarket Matrix) and one chart signal reversal (see Intermarket Matrix). Nine charts ended on reversal alert (see Intermarket Matrix, Sector Switch, Market Cap Blend).

At the portfolio level, there were no position changes. There were, however, two dividend distributions to report (see Intermarket Matrix, Sector Switch).

Below, we detail all holdings, past-week position returns, fund standings and past-week fund returns on a strategy-by-strategy basis. We also break down the above-mentioned dividend distributions, chart changes, chart signal reversal and chart reversal warnings.

(more…)

Following last month’s bearish breakdown, our HYG (High Yld Bonds) to IEF (Mid Term Treas) price ratio has turned bullish again. A bullish price ratio in this case means that HYG is outperforming IEF as credit spreads narrow. Such action typically coincides with robust or increasing investor appetite for riskier assets such as stocks and property.

Couple this development with recent bullish breakouts for IJT (Small Cap Growth) and IJS (Small Cap Value), and it seems safe to conclude that the “risk on” trade is back in favor.

The strategies finished collectively higher again this week in a near repeat of last week’s action. Market Cap Blend lead with a 2.12% gain. Sector Switch was second best, adding 1.76%. Intermarket Matrix lagged its peers, but still rose a respectable 1.13%. Our broad US equity measure, meanwhile, tacked on 2.42% and touched yet another all-time high.

It was another quiet week across Relative Strength matrixes, where we registered just two RS chart changes (see Intermarket Matrix). Seven RS charts ended the week on reversal alert (see Intermarket Matrix, Market Cap Blend).

At the portfolio level, there were no position changes or dividend distributions to report.

Below, we detail all holdings, past-week position returns, fund standings and past-week fund returns on a strategy-by-strategy basis. We also break down the above-mentioned chart changes and chart reversal warnings.

(more…)

The strategies bounced back this week from last week’s losses. Market Cap Blend lead with a 2.31% gain. Sector Switch was second best, adding 1.61%. Intermarket Matrix lagged both, but still managed to tack on 0.68%. Our broad US equity measure rose 1.78%.

It was a much quieter week across Relative Strength matrixes, where we saw just six RS chart changes (see Intermarket Matrix, Sector Switch). Eight charts ended the week on reversal alert (see Market Cap Blend).

At the portfolio level, there were no position changes or dividend distributions to report.

Below, we detail all holdings, past-week position returns, fund standings and past-week fund returns on a strategy-by-strategy basis. We also break down the above-mentioned RS chart changes and chart reversal warnings.

(more…)

The strategies reversed course and ended lower across the board this week. Intermarket Matrix fared best with a relatively mild 0.39% loss. Sector Switch fell 1.72% and Market Cap Blend gave up 2.41%. Our broad US equity measure, meanwhile, shed 2.09%.

It was another very active week across Relative Strength matrixes, where we recorded 47 RS chart changes (see Intermarket Matrix, Sector Switch) and one chart signal reversal (see Sector Switch). Thirteen charts ended the week on reversal alert (see Intermarket Matrix, Sector Switch, Market Cap Blend).

At the portfolio level, there were no position changes or dividend distributions to report.

Below, we detail all holdings, past-week position returns, fund standings and past-week fund returns on a strategy-by-strategy basis. We also break down the above-mentioned chart changes, chart signal reversal and chart reversal warnings.

(more…)

DBB (Base Metals) has violated chart support dating back to July, 2010 and formed a spread triple bottom breakdown in the process. This comes as precious metal prices continue their downward spiral and crude oil sells off.

While it remains to be seen how these developments will affect our strategies, it seems safe to assume that market expectations for both inflation and global growth are waning. Will this in turn drive risk assets such as stocks and real estate lower? I really don’t know. Based on today’s price action, it certainly seems likely. Regardless, the intermarket signs are ominous enough to merit extreme caution if you are considering opening or adding to risk positions in the near term.

Less than two months after Silver’s collapse, DGL (Gold) has followed suit with a spectacular triple bottom breakdown of its own. The chart is now firmly bearish with a downside price target of 45. That fact, coupled with general weakness across the commodity complex as a whole, is a real kick in the gut for those basing bets on hyperinflation predictions.

I really mean no disrespect with that observation. Truth be told, I find many of those same predictions to be absolutely plausible. That said, as Relative Strength investors, it is imperative that we set aside such prognostications and allow price to dictate our dollar flows. At the moment, Gold’s price is unequivocally bearish, as is its new position near the bottom of the Intermarket Matrix.

The strategies ended collectively higher this week. Sector Switch lead with a 2.77% gain. Market Cap Blend was second best, adding 2.01%. Intermarket Matrix lagged both but still tacked on 1.66%. Our broad US equity measure, meanwhile, rose 2.35% and made another all-time high.

It was a very active week across Relative Strength matrixes, where we counted a whopping 34 RS chart changes (see Intermarket Matrix, Sector Switch), one chart signal reversal (see Intermarket Matrix), and four fund rank changes (see Intermarket Matrix). Twelve RS charts ended the week on reversal alert (see Sector Switch, Market Cap Blend).

That activity failed to trigger changes at the portfolio level, however, and there were no dividend distributions to report.

Below, we detail all holdings, past-week position returns, fund standings and past-week fund returns on a strategy-by-strategy basis. We also break down the above-mentioned RS chart changes, chart signal reversal, fund rank changes and chart reversal warnings.

(more…)

Following last month’s bullish X reversal, credit spreads have flipped and are now signaling that a stock market pullback may be immiment.

As you can see in the first chart above, the HYG (High Yld Bonds) to IEF (Mid Term Treas) price ratio is back in falling Os and has formed a bearish double bottom breakdown. A falling price ratio in this case means that HYG is underperforming IEF as credit spreads widen. Such action is typical when investor appetite for riskier assets such as stocks is waning.

Couple that development with bearish X-to-O column reversals for IJT (Small Cap Growth) and IJS (Small Cap Value), as well as recent strength across defensive sector ETFs such as XLU (Utilities) and XLP (Consumer Staples), and it becomes clear that the “risk on” trade we’ve enjoyed all year is losing steam…at least for now.

Bear in mind that these developments are not actionable events as far as our strategies are concerned, and that a pullback is in no way guaranteed. However, the signs are ominous enough to merit caution. If you are considering opening or adding to positions in riskier assets such as stocks or lower quality bonds, you would be well advised to wait for these trends to reverse before pulling the trigger.

My two cents…

The strategies turned in mixed results this week. Intermarket Matrix was our stand out performer, with a 1.79% gain. Sector Switch lost 0.41% and Market Cap Blend dropped a heavy 2.51%. Our broad US equity measure fell 0.96%.

It was an active week across Relative Strength matrixes, where we registered 22 RS chart changes (see Intermarket Matrix, Sector Switch) and one chart signal reversal (see Intermarket Matrix). Fifteen charts ended the week on reversal alert (see Intermarket Matrix, Sector Switch, Market Cap Blend).

At the portfolio level, there were no position changes. There were, however, four more dividend distributions to report (see Intermarket Matrix, Sector Switch, Market Cap Blend).

Below, we detail all holdings, past-week position returns, fund standings and past-week fund returns on a strategy-by-strategy basis. We also break down the above-mentioned dividend distributions, RS chart changes, chart signal reversal and signal reversal warnings.

(more…)

From Barry Ritholtz’s latest musings on risk, returns, the rally, etc…

Consuming more information does not help you make better decisions — rather, it helps you be more confident about bad decisions you are making.

Wise words that dovetail nicely with last week’s Phil Perlman quote.

HT: Abnormal Returns