The Relativity Report

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.

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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.

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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.

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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.

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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.

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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.

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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.

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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

The strategies returned to winning ways this holiday-shortened week. Intermarket Matrix lead with a 1.07% gain. Sector Switch tacked on 0.90% and Market Cap Blend added 0.69%. Our broad US equity measure, meanwhile, also rose 0.69% and made a new all-time high in the process.

Things perked up a bit across Relative Strength matrixes, where we counted nine RS chart changes (see Intermarket Matrix, Sector Switch, Market Cap Blend) and one chart signal reversal (see Market Cap Blend). Sixteen 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, 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 reversal and chart reversal warnings.

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Phil Perlman has some words this week for those of you out there trying to separate noise from useful market information. Says Perlman:

IT’S ALL NOISE.

There are so many sources competing for your eyeballs and they will say anything to get you to allocate your precious time and energy that would be better spent focusing on your own method and goals.

…

The world is so complex that no matter how smart you are and how many blogs you read, you will not have an information edge amid this glorious festival of noise.

Too downbeat? I don’t think so. In fact, Perlman’s message – to forget the chatter and focus on your own approach – is at the heart of what we strive to do here at the Report.

We don’t prognosticate, we don’t pump, and we don’t get wrapped up in news trends. Rather, we focus on concrete developments within our own family of price-driven investment strategies, for readers to ponder, act on, or otherwise. Full stop.

HT: Abnormal Returns

The strategies ended essentially flat this week. Sector Switch was our only winner with a slender 0.15% gain. Intermarket Matrix broke even and Market Cap Blend lost 0.18%. Our broad US equity measure, meanwhile, fell 0.15%.

It was dead calm across Relative Strength matrixes, where we failed to register a single RS chart change, chart reversal, or fund rank change. Like last week, 20 RS charts ended 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 reversal warnings.

(more…)

I’ve been trying for days to provide some meaningful commentary on a great article that I read this past weekend by David Varadi of CSS Analytics. It seems however that events on both the home and work fronts have conspired against me. So, I’m going to keep this simple.

First, please read Varadi’s article. It’ entertaining, very clear, and full of great information that is salient to anyone who adheres to trend-following, relative strength/momentum or tactical investment strategies (such as we do here at the Report).

Next, if you walk away from that reading having learned just one thing, let it be Varadi’s own first takeway:

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

That sounds obvious enough, but it’s a point that I fear is lost on many investors today who lack both the patience and discipline to select a proven investment approach and than stick to it, even through periods of underperformance.

HT: Abnormal Returns

For you gold bugs out there. The chart above was lifted from a Sober Look post examining the potential for firmer gold prices ahead.

We’re Relative Strength investors here, and there’s no arguing that the yellow metal has been weak on a relative basis in recent months. That said, if the author’s thesis proves correct, expect both DGL (Gold) and DBS (Silver) to improve their standings within our Intermarket Matrix in coming weeks/months. If either claims top spot, the system will react accordingly.

HT: Abnormal Returns

For a third straight week the strategies were collective winners. Market Cap Blend lead again, this week with a 0.61% gain. Intermarket Matrix was a close second, rising 0.55%. Sector Switch lagged both, but still edged up 0.06%. Our broad US equity measure, meanwhile, tacked on 0.25% to notch its own third straight weekly advance.

Across Relative Strength matrixes, there were six RS chart changes (see Intermarket Matrix, Sector Switch, Market Cap Blend), one chart signal reversal (see Sector Switch), and three fund rank changes (see Sector Switch). Twenty RS 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 developments and fund rank changes.

(more…)

The chart above is taken from a recent post by Mebane Faber, who succinctly demonstrates the importance of accounting for dividends and income.

Faber is referring to a specific dividend ETF, but his point is relevant to any income-generating security or strategy, and explains why we here at the Report always use total returns to compare strategy and benchmark performances.

HT: Abnormal Returns

Brian Lund has put together a great list of things that he wish he’d known before he began trading. Topping that list is an item entitled “Complexity is your enemy”. In it, Lund states:

Take a look at almost any trading platform or charting software today and you will see more studies, indicators, and drawing tools that any one trader could ever need. At the end of the day all indicators are a derivative of price and volume, so why get so fancy? After many years of trying to find the “perfect indicator” I ended up with price, volume, S/R [support/resistance] levels, the occasional trendline, and a couple of key moving averages.

…

Unless you are on the Goldman Sachs trading floor or running your own hedge fund, keep it simple.

Now I’ll be the first to admit that there are many (and I do mean many) areas on which I, as an investor, badly need to improve. A (bordering-on-obsessive) desire to keep things simple is not one of them, however.

Simplicity was my primary goal when I set out to design the Report’s underlying system, and it is a defining characteristic of the system as it stands today. After all, when you boil them down, our strategies are based on just price with a smattering of support and resistance. Volume does not even enter the picture. It doesn’t get much simpler than that!

Is this a good thing? I say it is (and it’s very nice to hear a seasoned market vet like Lund make the case). Ironically, however, it’s also a factor that drives many would-be subscribers away from our site. Let’s face it, sexy sells, and Point and Figure charting just isn’t that sexy (no disrespect to A.W. Cohen).

Lund’s full post is here and well worth a read.

HT: Abnormal Returns