Market Insight

Facebook at Face Value

 

Facebook toyed with major intermediate-term support on its Thursday rout. As noted in the chart below, support can be seen at the gap up in the mid-160's from May, and a next level of support near 150 following Facebook's late March swoon.

Here's the chart:

 

FB07292018

So not much of a surprise to see the lows where they settled on Friday, supported by a wide channel trading range (175 to 195) that starts in August of 2017.

From a valuation perspecitve, I see FB modestly overvalued at its $175 close, by about 5%, pinning fair value near $165 per share. My valuation metrics are below:

FBValue

So probably not a bad level to wade into the stock, taking note of potential additional downside risk should the stock revisit its March-April lows. 

As for the assumptions in the valuation model, I have assumed a rather conservative 15% growth rate in free cashflow.  I look at growth from a long-term perspective, considering the company shifting to a more mature business model.

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60 Hits

TrendFlex Score & TrendFlex Signals for 7/20/2018

 

TrendFlex Credit Risk Premium Signals (CR)

The short term Classic signal remains long. The long term Allegiance signal remains short but near a buy point (looking for confirmation). 

TrendFlex Signal Trend  Date  Return

S&P 500  Return

S&P 500 timing signals based on credit risk (CR) premiums (corporate vs.Treasury debt). 
TrendFlex Classic CR Long 7/6/2018 +1.20% +1.20%
TrendFlex Allegiance CR Short 5/212018 -2.50% +2.50%
Historic Performance        

 TrendFlex Score

The TrendFlex Score decreased from 1.64 to 1.50 and closed below its three-week moving average, a bullish development. 

TFS07202018

   TrendFlex Trend Following Signals (TF)

The Trend-Following systems rely on key technical indicators expressing the health of the current trend.  They tend to be longer-term indicators.The indicators include the TrendFlex Allegiance Trend-Following Signal and the S&P 500 Monthly System.

The TrendFlex Allegiance trend-following signal remains in uptrend mode.  The short-term TrendFlex Classic trend-following signal has been discontinued.

TrendFlex Signal Trend  Date  Return

S&P 500  Return

Score

S&P 500 timing signals based on a weighted score of US Market technical indicators. Classic (short-term) and Allegiance (intermediate to long term).  Score:  Bullish = 1.0-1.75; Neutral = 1.75-2.25; Bearish = 2.25-3.0

TrendFlex Allegiance TF Uptrend 5/31/16 +33.40% +33.40% 1.125
Historic Performance          

S&P 500 Monthly System

spxmonthly 

The S&P 500 Monthly System is based on a 20 period simple moving average. Buy and sell signals are triggered based on price vs. 20 period moving average. A short trade is established only after 2 years of the S&P 500 remaining above its 20 period moving average, then closes below its 20 period moving average. The short position is covered with a close of the index above its 10 period exponential moving average. 

 Baseline Analytics Extremes Indicators

Baseline Analytics Extremes highlights four key TrendFlex Indicators and their level of extreme readings.  The key indicators include the following:

  1. CBOE VIX and Put/Call Ratio
  2. Moving Average Cross Momentum Signals
  3. LQD vs. S&P 500 GAP reading
  4. The TED Spread (Peaks & Troughs)

When one or more of these indicators has reached an extreme reading, chart and commentary will follow. The momentum signal indicator is near a sell signal (see red arrow in chart below).

   nymo2

 

 Portfolio Strategy Table

The Portfolio Strategies chart remains bullish, with an edge toward risk-aversion.   

Portfolio Strategies*
Reduce Longs
 Sell Calls
 Hedge Longs
Set Stops on Longs
Short Overbought Equities
 Add to Longs
Sell Puts
Hedge or Reduce Shorts
 Long Futures and Options

 *Red highlighted items are recommended strategies

 

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45 Hits

Index & Sector ETF Signals - 7/20/2018 Update

TrendFlex signals for select index and sector SPDR ETF's below are based on a trend-following system filtered to identify the "risk" to a change in the trend. ETF's represent US and foreign equities, commodities, bonds and the US Dollar.

Major Index ETF's 

Symbol 

     Trend

Trend Change Risk 

Observations and Rationale
 SPY

 Bullish 

Hi

Increased risk of pullback at resistance near record high

 DBA Bearish  Med Forming a higher low; deadcat bounce on Friday 
 GLD Bearish Med Downtrend continues; rising US dollar a factor
 VGK Bullish   Low Consolidating in an uptrend; possible breakout near
 UUP Bullish Med Rising rates positive
 TLT Bullish   Med Trading range as rates fluctuate
EEM Bullish   Med Consolidating gains; watch for potential shift to downtrend if breaks 40

ETF Technical Leaders

The following table represents ETF's that are in bullish trends and represent technically attractive reward-to-risk entry points (for example, we will shy away from adding an overbought ETF). Although these ETF selections have been pre-screened, investors are advised to pursue their own research to determine whether they are appropriate for their portfolios. Selections are time-sensitive and represent short-term swing trading opportunities that may or may not follow-through on a longer-term basis. In addition, selections may be voided once a market trend change has occurred based on the TrendFlex signals. Visit our FAQ's  for more suggestions regarding ETF Zone. Check back frequently as additional ETF's may be added to the week's list. 

Symbol Rationale Close Date Added
DEM Emerging markets dividend ETF consolidating recent gains; near 50-day MOV; 3.85% yield 43.66 7/20/18
XBI SPDR Biotech ETF bounces at support after modest correction 82.28 12/7/17
PFF Long basing pattern; closed above 50-day moving avg; 5.97% yield 38.13 11/18/17
RSX Basing at 50-day moving average; attractive entry 20.49 8/24/17
EWI iShares Italy ETF inexpensive and possible long-term bottom formed 22.13 12/02/16
XLY Retracement from recent gains; attractive entry point 81.44 12/02/16 
XLV  Post-election catch-up;  nearing positive moving avg. cross (50 over 200 day)  70.49 11/11/16 
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50 Hits

TrendFlex Classic Signal Shifts to Buy

Confirming the trend shift to buy.  Entry price will be set at Monday's market open:

TFCCR07062018

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79 Hits

TrendFlex Score & TrendFlex Signals for 6/29/2018

 

TrendFlex Credit Risk Premium Signals (CR)

The short term and long term TrendFlex Classic signals are short. 

TrendFlex Signal Trend  Date  Return

S&P 500  Return

S&P 500 timing signals based on credit risk (CR) premiums (corporate vs.Treasury debt). 
TrendFlex Classic CR Short 5/22/2018 +0.20% -0.20%
TrendFlex Allegiance CR Short 5/212018 +0.50% -0.50%
Historic Performance        

 TrendFlex Score

The TrendFlex Score decreased from 1.65 to 1.61 and is even with its three-week moving average. 

TFS06292018

   TrendFlex Trend Following Signals (TF)

The TrendFlex Classic shifted to Cash while Allegiance remains in uptrend mode.  

TrendFlex Signal Trend  Date  Return

S&P 500  Return

Score

S&P 500 timing signals based on a weighted score of US Market technical indicators. Classic (short-term) and Allegiance (intermediate to long term).  Score:  Bullish = 1.0-1.75; Neutral = 1.75-2.25; Bearish = 2.25-3.0

TrendFlex Classic TF Uptrend 5/4/18

+0.00%

+0.70% 1.900
TrendFlex Allegiance TF Uptrend 5/31/16 +29.40% +29.40% 1.375
Historic Performance          

 Baseline Analytics Extremes Indicators

Baseline Analytics Extremes highlights four key TrendFlex Indicators and their level of extreme readings.  The key indicators include the following:

  1. CBOE VIX and Put/Call Ratio
  2. Moving Average Cross Momentum Signals
  3. LQD vs. S&P 500 GAP reading

When one or more of these indicators has reached an extreme reading, chart and commentary will follow. The Put/Call ratio reached an extreme reading this week. 

VIX06292018

 

  

 

 Portfolio Strategy Table

The Portfolio Strategies chart remains bullish, with an edge toward risk-aversion.   

Portfolio Strategies*
Reduce Longs
 Sell Calls
 Hedge Longs
Set Stops on Longs
Short Overbought Equities
 Add to Longs
Sell Puts
Hedge or Reduce Shorts
 Long Futures and Options

 *Red highlighted items are recommended strategies

 

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75 Hits

TrendFlex Classic Remains on Sell Signal

As can be seen by the chart below, the TrendFlex Classic signal remains bearish.  Note the sharpness of the decline vs. its moving average.  The sell signal of 5/22 remains intact.  Hedge positions remain in place for longs.

 

Trendflex061918

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97 Hits

TrendFlex Score & TrendFlex Signals for 6/8/2018

 Next Update: Week ending 6/22.

TrendFlex Credit Risk Premium Signals (CR)

The short term and long term TrendFlex Classic signals are short. 

TrendFlex Signal Trend  Date  Return

S&P 500  Return

S&P 500 timing signals based on credit risk (CR) premiums (corporate vs.Treasury debt). 
TrendFlex Classic CR Short 5/22/2018 -0.40% +0.40%
TrendFlex Allegiance CR Short 5/212018 -0.10% +0.10%
Historic Performance        

 TrendFlex Score

The TrendFlex Score is at 1.58 and is slightly above its three-week moving average, a bearish development. 

TFS06082018

   TrendFlex Trend Following Signals (TF)

The TrendFlex Classic and Allegiance are in uptrend mode.  

TrendFlex Signal Trend  Date  Return

S&P 500  Return

Score

S&P 500 timing signals based on a weighted score of US Market technical indicators. Classic (short-term) and Allegiance (intermediate to long term).  Score:  Bullish = 1.0-1.75; Neutral = 1.75-2.25; Bearish = 2.25-3.0

TrendFlex Classic TF Uptrend 5/4/18

+2.70%

+2.70% 1.500
TrendFlex Allegiance TF Uptrend 5/31/16 +30.20% +30.20% 1.375
Historic Performance          

 Baseline Analytics Extremes Indicators

Baseline Analytics Extremes highlights four key TrendFlex Indicators and their level of extreme readings.  The key indicators include the following:

  1. CBOE VIX and Put/Call Ratio
  2. Moving Average Cross Momentum Signals
  3. LQD vs. S&P 500 GAP reading

When one or more of these indicators has reached an extreme reading, chart and commentary will follow. There are no extreme readings this week. 

  

 

 Portfolio Strategy Table

The Portfolio Strategies chart remains bullish, with an edge toward risk-aversion.   

Portfolio Strategies*
Reduce Longs
 Sell Calls
 Hedge Longs
Set Stops on Longs
Short Overbought Equities
 Add to Longs
Sell Puts
Hedge or Reduce Shorts
 Long Futures and Options

 *Red highlighted items are recommended strategies

 

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111 Hits

TrendFlex Score & TrendFlex Signals for 6/1/2018

 

TrendFlex Credit Risk Premium Signals (CR)

The short term and long term TrendFlex Classic signals are short. 

TrendFlex Signal Trend  Date  Return

S&P 500  Return

S&P 500 timing signals based on credit risk (CR) premiums (corporate vs.Treasury debt). 
TrendFlex Classic CR Short 5/22/2018 -0.40% +0.40%
TrendFlex Allegiance CR Short 5/212018 -0.10% +0.10%
Historic Performance        

 TrendFlex Score

The TrendFlex Score is at 1.59 and is slightly above its three-week moving average, a bearish development. 

 TFS06012018

   TrendFlex Trend Following Signals (TF)

The TrendFlex Classic and Allegiance are in uptrend mode.  

TrendFlex Signal Trend  Date  Return

S&P 500  Return

Score

S&P 500 timing signals based on a weighted score of US Market technical indicators. Classic (short-term) and Allegiance (intermediate to long term).  Score:  Bullish = 1.0-1.75; Neutral = 1.75-2.25; Bearish = 2.25-3.0

TrendFlex Classic TF Uptrend 5/4/18

+2.70%

+2.70% 1.500
TrendFlex Allegiance TF Uptrend 5/31/16 +30.20% +30.20% 1.375
Historic Performance          

 Baseline Analytics Extremes Indicators

Baseline Analytics Extremes highlights four key TrendFlex Indicators and their level of extreme readings.  The key indicators include the following:

  1. CBOE VIX and Put/Call Ratio
  2. Moving Average Cross Momentum Signals
  3. LQD vs. S&P 500 GAP reading

When one or more of these indicators has reached an extreme reading, chart and commentary will follow. There are no extreme readings this week. 

  

 

 Portfolio Strategy Table

The Portfolio Strategies chart remains bullish, with an edge toward risk-aversion.   

Portfolio Strategies*
Reduce Longs
 Sell Calls
 Hedge Longs
Set Stops on Longs
Short Overbought Equities
 Add to Longs
Sell Puts
Hedge or Reduce Shorts
 Long Futures and Options

 *Red highlighted items are recommended strategies

 

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107 Hits

LQD Gap Indicator Supports Hedging Long Stock Positions

Our gap indicator showing the divergence between a ratio of LQD/SPX and its moving average, has expanded further below the moving average line.  See the chart below.

LQD010318

Such gaps tend to proceed a bit of profit taking in the S&P 500 (see the red dotted lines).  Interesting to note also the green dotted lines, whereby the gap is recovered (or there is a gap ABOVE the moving average), signaling a good time to be long.

Today's reading suggests that hedging long positions is in order.

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574 Hits

Unwinding of Tech (and Re-winding of Financials)

Today there was quite a reversal in financial stocks at the "expense" of technology.  The chart below plots a ratio of the XLF Finance SPDR vs. the XLK Technology SPDR.  Note today's surge:

xlfxlk

What is interesting is the "fits and starts" seen over the plotted timeframe since April.  This leads us to assess that what we saw today was merely a reversion to the mean for tech, and a resumption of the uptrend (along with the broader market) for financials.

Note the smaller charts below: XLK (Tech) is settling near its 50-day moving average (not there yet so some more potential downside in store). Financials (XLF), with their strong surge moves their index back to the "up" trendline.

So in our view, just a bit of sector rotation unwiding the excesses we have seen in tech, with laggard financials catching up.  

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487 Hits

Thinking About the Yield Curve

Baseline Analytics checks in on a monthly basis the status of the yield curve as displayed on StockCharts.com.  StockCharts does a great job showing the yield curve dynamically, correlating it with the price of the S&P 500 since the late 1990's.  

Here's a snapshot.  You can run the dynamic activity by visiting this link.

dyc

Marc chandler wrote this interesting blog as we think about the components of the yield curve and what it's up to. Click here to see Marc's blog.

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556 Hits

TrendFlex Classic CR Signal

True to recent whipsaw activity (modest market setbacks followed by continuation of the uptrend), the TrendFlex Classic CR signal crossed above its moving average (rather decisively) on 11/21.  See the chart below.

TFC11222017

A number of other indicators are flashing warnings (i.e. RSI for the S&P 500 is showing negative divergence). Caution still rules, however the TrendFlex Classic CR signal may reset following this week's market activity.

Diverge

 

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629 Hits

Small Cap Relative Strength Picks Up

Small Cap stocks have lagged in relative strength versus their larger-cap brethren. Recently, however, improved market breadth has brought along a resurgence in small caps.

Note the improved relative strength in Small Cap Value (IJS) and the Russell 2000 (IWM) ETF's as a ration of the indices with the S&P 500.  Broader market participation of the small cap sector invites us to seek growth and value-oriented small cap opportunties.

 

IWM Snippet

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594 Hits

High Yield Bond Risk - Time for Defensive Strategies?

Investors have poured billions of dollars into Exchange-Traded Funds focused on high-yoeld securities. In this article, David Fabian of FMD Capital Management addresses the recent volatility in high yield bond ETF's and defensive strategies to protect capital.  Click here for David's article.

 

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542 Hits

TrendFlex CR Sell Signal Remains in Effect

Opportunity to hedge long positions continues.  The SELL signal for the S&P 500 established at the market close of November 9th has a positive return of +0.8%.  See the updated chart below:

TFCCR11152017

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549 Hits

Sell Signal TrendFlex Classic CR

At the market close of 11/8/2017, the TrendFlex Classic CR signal avoided a SELL despite an intraday dip into SELL territory.  Today, the indicator has once again turned bearish, as can be seen in the chart below.  We require a close below its moving average, so at this time the SELL signal is not a done deal, but we suspect it will be and have noted today's market close as a new SELL signal.

TFCCR11092017b

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575 Hits

Pending Sell Signal TrendFlex Classic CR

The TrendFlex Classic CR indicator is heading toward a sell signal.  It has been on a buy signal since 9/14/17.  Confirmation will be based on a close below its moving average (see red circle to the right on the chart below).

 

TFCCR11072017

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520 Hits

Low Volatility ETF's

There is a growing batch of US and global low-volatility ETF's - many of which sport decent dividend yields.  See this article by David Fabian of FMD Capital Management about the "Ins and Outs of Low Volatility ETF's."

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661 Hits

NYSE High/Low Ratio: Time for SPX to Take a Breather

In the chart below, see the section labeled "$NYHL."  The New York Stock Exchange High/Low Ratio shows peaks and troughs which correspond to peaks and troughs in the S&P 500.  The green lines are bullish equity signals, while the red are bearish.

This scenario portends hedging longs after this recent "melt up" in equity prices.

NYHL10062017

 

 

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674 Hits

LQD Gap Extreme Is Growing

One of our extreme indicators is the gap in our LQD/IEF ratio vs. its moving average.  The chart below suggests that this gap, which has preceded past declines in the S&P500, may be forewarning a setback in equities.

 

LQD09212017

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712 Hits

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