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Friday, October 12, 2018

10/11/18 Market Update - Fear & Greed Index Only 5

Yesterday the markets fell enough to turn sentiment very bearish which is what we usually need for a strong rally.

Yesterday, the markets were down off their peaks roughly:
  • Dow $INDU down 7.7%
  • S&P500 $SPX down 8.0%
  • Nasdaq $COMPQ down 10.6%
  • Russell 2000 $RUT down 12.9%
The Fear and Greed Index crashing to 5 usually means the markets will be significantly higher soon.


Timer Digest Coverage of My 9/21/18 Newsletter

Needless to say, I used that cash to add to shares during the decline including one of my favorite big name US tech stocks and a beaten down international ETF!

More charts:


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Wednesday, September 26, 2018

Fed Raises Rates - Removes "Accommodative" from Policy Language

Today the US Federal Reserve Open Market Committee (FOMC) raised their Fed funds interest rate by 0.25% to a new range of 2.00% to 2.25%. As my chart below shows, this new rate is still low by historical standards.

The Fed will also increase its balance sheet reduction (reverse QE) by another $12 billion per month:
The Committee directs the Desk to continue rolling over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing during September that exceeds $24 billion, and to continue reinvesting in agency mortgage-backed securities the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during September that exceeds $16 billion. Effective in October, the Committee directs the Desk to roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing during each calendar month that exceeds $30 billion, and to reinvest in agency mortgage-backed securities the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities received during each calendar month that exceeds $20 billion. Small deviations from these amounts for operational reasons are acceptable.
The US Stock markets liked the move because it signals that the economy is still strong.
Had the FOMC not raised rates, perhaps under political pressure from President Trump who likes low rates to stimulate GDP growth, the markets could have take in as a sign of weakness in the US economy.
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The FOMC also increased their estimate for GDP growth for 2018 and 2019 since the last meeting.

More information:

Saturday, September 01, 2018

ECRI Warns Elevated Risk of 10 to 20% Correction

Lakshman Achuthan, managing director at the Economic Cycle Research Institute or ECRI told CNBC yesterday that the US stock market is facing elevated risk of 10 to 20 percent correction.
Click for Full Sized Images
We ALREADY had a 12% decline  and the market is just pulling above its prior high.  
The stock market is part of ECRI's leading indicators so its new highs could also be signaling that ECRI's Weekly Leading Index (WLI) growth rate is about to bottom.  


Stock market facing elevated risk of 10-20 percent correction, economic forecaster says from CNBC.

So the question remains is a second decline over 10%  this year about to start? 

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Thursday, August 30, 2018

State Street Investor Confidence Index at 18 Month Low

Yesterday State Street said their Investor Confidence Index fell to an 18-month low of 94.3.

  • pdf: Investor Confidence Declined in August by 7.4 points to 94.3
  • “After a few months of caution and measured risk appetite, global institutional investors have started to display risk-averse behavior as they navigate through elevated trade uncertainty and geopolitical turmoil. This sentiment was also seen across global equity markets as defensive sectors outperformed. The decline in confidence was particularly apparent for North American investors, with the North American ICI recording its lowest reading of the year,” commented Kenneth Froot.
  • A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets.
  • Graph: State Street Investor Confidence Index vs the S&P500 



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According to State Street,
 "The Investor Confidence Index was developed by Kenneth Froot and Paul O’Connell at State Street Associates, State Street Global Exchange’s research and advisory services business. It measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors."


Friday, August 24, 2018

New Record Highs After Fed Chairman Powell says The US Economy is Strong!

Today, three of the four major US stock market indexes I follow closed at new record highs.
In Jackson Hole, Wyoming this morning Fed chairman Jerome Powell said the strong US economy justifies raising interest rates, but in a gradual fashion.  Most take this to mean the Fed will raise rates in September and perhaps once more before the year ends. 

From "Monetary Policy in a Changing Economy"  Transcript

“As the most recent FOMC statement indicates, if the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate
The economy is strong. Inflation is near our 2 percent objective, and most people who want a job are finding one. My colleagues and I are carefully monitoring incoming data, and we are setting policy to do what monetary policy can do to support continued growth, a strong labor market, and inflation near 2 percent.”
This expected 0.25% rate increase in September would bring the Fed Funds rate to a range of 2.00% to 2.25% from its current range of 1.75% to 2.00%.

I discussed this in my latest newsletter and Timer Digest wrote about it this weekend:

my commentary
Here are charts of the four major US stock market indexes I track showing that in fact the markets were happy with the Fed raising rates.

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More about Timer Digest: "Timer Digest monitors over 100 of the leading market timing models, ranking the top stock, bond, and gold timing according to the performance of their recommendations over various periods of time. Timer Digest profiles many of the Top Investment and Financial Newsletter writers, including discussions of their timing models."
Treasury Bond Rates vs the Fed Funds rate





Thursday, August 23, 2018

AAII Irrational Exuberance & Pessimism Sentiment Graph

AAII Bulls Minus Bears vs DJIA and "Irrational Exuberance & Pessimism" Investor Sentiment Graph for 8/22/18:
The AAII Investor Sentiment Survey measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market for the next six months. AAII is the "American Association of Individual Investors." For the survey, Individual members of the AAII are polled on a weekly basis. Only one vote per member is accepted in each weekly voting period. The AAII reports the weekly results at https://www.aaii.com/sentimentsurvey/.
As of 8/22/18, the AAII members are:
  • Bullish: 38.46%
  • Neutral: 34.47%
  • Bearish: 27.07%
AAII Bulls vs Bears Investor Sentiment "Irrational Exuberance & Pessimism" Graph

Timer Digest Update:


More about Timer Digest: "Timer Digest monitors over 100 of the leading market timing models, ranking the top stock, bond, and gold timing according to the performance of their recommendations over various periods of time. Timer Digest profiles many of the Top Investment and Financial Newsletter writers, including discussions of their timing models."

To get my "Special Email Alerts" and the "Auto Buy Sell Table" where I list ahead of time what stocks I will buy at what prices during declines and what I will sell during the advances. These buys and sells are at preset target prices you can use to set limit orders at your broker.
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 August 2018 
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Charts of the AAII (American Association of Individual Investors) Bulls minus Bears Index versus the market are key sentiment indicators for stock market technical analysis.  Contrarian theory states the time to buy is when fear and pessimism are at a maximum since this usually occurs near market bottoms.

More Information



Monday, August 06, 2018

Bitcoin Scam - First and Final Notice Scam & Extortion Letter

A neighbor (Marius Milner, Barron Park) posted this in our local "nextdoor.com" social media group.
Bitcoin extortion scam doing the rounds 
I got a letter in the mail, in a plain white window envelope with no return address and no legible postmark. I've attached photos with my address and most of the scammer's Bitcoin address edited out.
A quick search for the contents suggest that this has been going on for a few months. The letter is sufficiently well worded that I think some people might be easily taken in by it. Don't be fooled, and stay safe!
If you get one of these letters, report it to the police department and the US Postal Service.


Update
Marius Milner - Barron Park·23m ago
I've reported this letter to the US Postal Inspection Service, since it's mail fraud. I looked up the Bitcoin address they told me to send money to, and unsurprisingly it has zero balance and no transaction history, making it effectively untraceable.

Saturday, June 23, 2018

Citigroup Panic-Euphoria Sentiment Indicator Update

Chart of Citigroup's Panic/ Euphoria Model  vs SPY as of June 23, 2018:
Today, Citigroup's Panic/ Euphoria Model is at 0.16, showing neither panic or euphoria.  If you look at my "Dow vs Oscillators" chart below that suggests a market turn next week, it looks like the Panic Euphoria model is making another higher low before the start of the typical "Summer Rally."
"The panic/euphoria model is a gauge of investor sentiment.  It identifies "Panic" and "Euphoria" levels which are statistically driven buy and sell signals for the broader market.  Historically, a reading below panic supports a better than 95% likelihood that stock prices will be higher one year later, while euphoria levels generate a better than 70% probability of stock prices being lower one year later.”   
Note:  Some articles I've found suggest  Citigroup's Panic/ Euphoria Model completely missed the financial collapse in 2008 so the model was "reformulated."  My guess is it is like most sentiment models in that its more useful to look at rate and direction of levels rather than absolute levels.
Dow vs Oscillators
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Saturday, June 16, 2018

Stock Market & Sentiment Update for June 16, 2018

We're nearly half way into 2018 and all stock markets have positive returns while the bond market, as measured by Vanguard's Total Bond Fund, is down 1.99% YTD.
Click the chart to see full sized images 
Market (charts) Update

Below are many of my favorite charts.  I explain most of the sentiment charts when I feature them in my newsletter.

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To get my "Special Email Alerts" and the "Auto Buy Sell Table" where I list ahead of time what stocks I will buy at what prices during declines and what I will sell during the advances. These buys and sells are at preset target prices you can use to set limit orders at your broker.
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Kirk Lindstrom's Investment Letter Performance

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