Market Insight

Gold Miner's Technicals - An Interesting Setup?

Gold and the Gold Miner's ETF (GDX) have been despised for quite a while.  It is often when an investment is shunned and ignored, that it is ripe for a shift in sentiment and price.  

Looking at the VanEck Vectors Gold Miners ETF (GDX), it is interesting to note that price has bounced from a long-term support level near 20 (see the monthly chart below) 

 GDX Mon

Also noteworthy, on the daily chart, the GDX has closed above its 50-day exponential moving average. GDX rallied from its recent lows near 19 on decent volume.

GDX daily

So we could be looking at a profitable turning point in GDX (and gold in general). Perhaps volatility and uncertainty regarding the new administration or even some early signs of price growth in the inflation readings, are influencing this recent price behavior. 

 

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TrendFlex Market Trend Risk Assessment - 12/27/2016

As equities reach new highs, several market trend risk indicators as measured by our proprietary TrendFlex system are underscoring the risk to long positions at this stage of the rally.

Our flagship TrendFlex Classis CR (credit risk premium indicator) is about as bullish (for equities) as it can be, which can be interpreted as a contrarian signal.  We are firm believers in "reversion to the mean," and as the chart below suggests, the wide gap between the ratio of corporate vs. treasury debt versus its moving average (dotted line) calls for a possible pause in the equity uptrend.

TFCCR12232016

The weekly version of the TrendFlex CR similarly demonstrates today's extreme readings:

TFACR12232016

No doubt that the charts above are wildly bullish.  Although we are trend followers, we take very seriously the indicators that measure the risk of a trend change.  

Baseline Analytics Extremes highlights three key TrendFlex Indicators and their level of extremes.  The key indicators include the following:

  1. CBOE VIX and Put/Call Ratio
  2. TED Spread
  3. LQD vs. S&P 500 GAP reading

Here is what these indicators are telling us, following the market close of 12/23/16.

The Vix/Put Call Gap versus their respective moving averages measures complacency among traders and investors. Note the VIX (top portion of chart below) falling well below its moving average.  As can be seen on the chart, such gaps below (and above) its moving average tend to precede shifts in the S&P 500. VIX is hinting at a potential setback in equities.  Interestingly, the Put/Call ratio is neutral.

VIX12232016

The TED Spread is a measure of perceived credit risk in the US Economy.  Peaks in the spread (see blue areas in bottom of chart below).  This indicator has preceded shifts in the market trend rather consistently over the timeframe displayed below.  It may be hinting at a firming of Treasuries following their rather sharp selloff since peaking in July.

TED12232016 

Finally, the gap between our LQD/S&P 500 ratio (a derivative of the Trendflex CR indicator) is sitting at an extreme low (see bottom portion of chart below).  This large gap suggests that equities have moved too far too fast and are in needs of a consolidation of recent returns.  

LQD Gap 12232016

We have also previously noted the progress in the Dow Theory technical indicator.  The two indices  (Dow Jones Industrial Average and Dow Transportation Index) recently hit new highs, a traditional technical measure of a confirmed bull market.  Again, however, we harken to a cautious stance given the swiftness of this move upward and the extreme readings in our various indicators.

Dow122316

What to do? Think about wading into long positions in instruments that have swooned during this uptrend (perhaps small positions in bonds, gold, agricultural commodities) to diversify and dollar-cost average.  Europe and emerging markets are also beginning to look interesting (perhaps VGK and EEM will play catch-up to the US). Hedging long positions with e-Mini S&P 500 futures may be in order, as well as selling call options.  

Equities have tended to do well in the week before the holidays and afterward, but have consistently slipped as the new year dawns.  We would rather hedge our bets and look for prices to settle down before adding to long positions, as the major indices, although overbought, are clearly bullish.  

Best to your investing, and Happy New Year!

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Hedging Our Bets - 12/8/16 Midday Update

Overbought equities and extreme readings in several TrendFlex market trend indicator convinced us to add hedges to long positions. We will update the TrendFlex Score and charts this weekend.

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New Month, New Dividends: Welcome December!

dvdsBaseline Analytics has refined a series of stock and ETF-screening algorithms that pinpoint timely, high-probability trades and investment opportunities.

The results of Baseline Analytics' stock and ETF screens are delivered in a downloadable Excel file.  This file can be sorted to identify various performance and technical criteria to help provide a further edge to your trading and investments. Instructions are provided to guide you through your review. Our goal is to deliver such opportunities at your fingertips, with minimal research and analysis needed on your end.  We do provide a link to Yahoo Finance for each of our timely picks should you want to delve further into particular equities or ETF's.

Baseline Analytics has published its list of the stocks going Ex-Dividend in December that exhibit favorable technical trends. Perhaps a dividend-payer or two will emerge as a timely, attractive investment. 

This list is offered free of charge.  Please check out our Premium Services , at a price of only $79 per year!

Click here for the list.

Subscribers to Baseline Analytics receive our proprietary screens regularly, and this screen in particular will be honed even further for more targeted opportunities, including noteworthy fundamental and technical criteria.  Receive these updates as well as our TrendFlex family of market trend signals and risk assessment tools as a subscriber to Baseline Analytics.

Profitable investing!

Baseline Analytics

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Extreme Reading Turning Neutral - Buying Opportunity?

We look for peaks and troughs in the CBOE VIX indicator versus its moving average (see chart below).  Peaks tend to coincide with short-term market lows, and troughs with market highs (measured by the S&P 500 index).  

Note how VIX hit a trough before the S&P 500 settled back from its recent high.  Since then, VIX has turned neutral (closing in on its moving average).  We read this as a bullish sign, as recent consolidation in the S&P 500 may present a less risky opportunity to add to longs.

VIX12022016 

 

 

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Extreme reading turning neutral

We look for peaks and troughs in the CBOE VIX indicator versus its moving average (see chart below).  Peaks tend to coincide with short-term market lows, and troughs with market highs (measured by the S&P 500 index).  

Note how VIX hit a trough before the S&P 500 settled back from its recent high.  Since then, VIX has turned neutral (closing in on its moving average).

 

 

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Dow Theory Bullish

Can't ignore the positive correlation of the Dow Jones Industrial Averages and the Dow Transportation Index.  Transports not far from hitting a new high to join the Industrials.  A bullish trend.  Watch out for extremes however (in sentiment and momentum indicators).  Our new TrendFlex Extremes readings are updated regularly as they develop.

 

DT112916

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Dow Theory Buy Signals Looking Promising

Check out the confirming uptrends in both the Dow Industrials and Transports.  Another sign of support for the uptrend.

 

DT1116

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Junk Bond Divergence - Implications for Equities?

In April 2015 we saw a break in the SPDR Barclays High Yield Bond ETF as it fell to its early 2016 lows.  As that happened, the S&P 500 see-sawed, mildly correcting and then failing to resume an uptrend until the JNK ETF resumed its uptrend.

We have seen confirmation (both in uptrends) since early 2016.  Recently, however, divergence has appeared as the JNK ETF recently pulled back from its highs.  The S&P 500 has been fighting toward new highs but is beginning to feel the resistance.  

This relationship bears watching should JNK continue to pull back. 

 

junk diverges

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Spotting Extremes as Clues to a Market Rally (or Sell-Off)

Baseline Analytics was founded in 2005 with a vision to assemble a variety of indicators that could identify extremes in the stock market, and to profit from the shifts in market trend following the occurence of an extreme indicator reading.

Our TrendFlex subscribers now receive timely indicator extreme alerts.  We have categorized our key indicator extremes as follows:

  1. CBOE VIX Reading and CBOE Put/Call Ratio
  2. TED Spread
  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.  Here are examples of charts depicting these extreme indicators and what they suggest will happen to the market trend.

CBOE VIX and CBOE 

Look for extreme readings in VIX and Put/Call versus a moving average of each indicator. Peaks and troughs in VIX and Put/Call offer strong indications of a short-term shift in the trend of the S&P 500.

CBOE11132016

TED Spread

Shifts in the TED Spread also help to spot extremes.  As can be seen in the chart below, an oscillator indicator at the bottom of the chart spots potential buy and sell opportunities in the S&P 500.

TED11132016 

LQD:S&P 500 Ratio GAP vs. Moving Average

Here is our basic Bond vs. Stock Market Indicator.  A large GAP in the ratio (see bottom portion of chart below) provides the extreme reading and opportunity to go long or short equities.

LQD Gap

Baseline Analytics subscribers receive updates on these indicators when they have reached extreme readings. These indicators also play a role in the TrendFlex Score, which represents a weighting of 12 key market trend indicators. Subscribers include Registered Investment Advisors, individual investors, and portfolio managers.

Subscribers most often use our indicators to hedge portfolios (one popular strategy is to short S&P 500 e-Mini futures when the CBOE VIX reading is at a trough compared to its moving average).

Visit our Premium Services page for information on our services.  Baseline Analytics is currently OPEN ACCESS, however our modest $79 annual fee will be re-introduced in the coming days (A 4-week Free Trial will be available).

 

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A Bullish TED Spread Signal

We've shown this chart before, highlighting the Buy and Sell signals for the S&P 500.  Just when I thought the post-election rally was getting a bit extended, the TED Spread signal flashed a convincing Buy.

 

TED1110

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Monday 11/7 Market Rally Recap

A powerful 2.2% rally in the S&P 500 propelled the index off its 200-day moving average.  Volume was on the lighter side.  VIX settled back from its extreme fear reading and the Put/Call ratio remains at a high 1.22,

We hedged longs a bit in the mid-afternoon, considering the possibility that equities moved a bit too fast for our liking going into Election Day.  Let's see what transpires tomorrow.  Trading enthusiasts might want to daytrade S&P 500 e-Mini futures while election results are posted in the evening. 

BLA11072016

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Monday 11/7 Market Rally Recap

A powerful 2.2% rally in the S&P 500 propelled the index off its 200-day moving average.  Volume was on the lighter side.  VIX settled back from its extreme fear reading and the Put/Call ratio remains at a high 1.22,

We hedged longs a bit in the mid-afternoon, considering the possibility that equities moved a bit too fast for our liking going into Election Day.  Let's see what transpires tomorrow.

BLA11072016

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Encouraging Support and Contrarian Extremes

An update to yesterday's report:

The S&P 500 bounced perfectly off its 200-day moving average support, an encouraging sign for resumption of the uptrend.  VIX extreme hints at potential rebound in equities.  Stochastics are now oversold.

tf1104

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Trend Change Watch - Extremes Singing Their Tune

A quick update on several technical indicators suggests that a rally may be near.  See chart and commentary below.

tf1103

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Fear and Loathing in the VIX Camp

Watching two "fear" indicators, VIX and the Put/Call Ratio have reached extremes that in the past have preceded short-term rallies.  Note the peaks and troughs of the VIX and Put/Call readings and their correlation with shifts in the S&P 500.  Note VIX especially as it gaps higher or lower than its moving average.

BLAVix113

 

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A Jolt of Fear - Market Trend Change Soon?

The S&P 500 closed off its lows on Tuesday, November 1.  The index settled at major support levels which, if they continue to hold, could pressage another shift toward new highs.

During the tumultous session, our fear gauges hit extremes.  See the VIX and Put/Call (CPC) sections of the chart below.

SPX1122016

We like to see both of these "fear" indicators hit relative extreme levels in order to help confirm whether the market trend is about to shift.  Both closed at extremes on Tuesday.  Although stochastics are not quite oversold, we consider this extreme reading in VIX/PutCall and the ability of the S&P 500 to settle at support, as positive indicators for equities.

The U.S. election certainly throws a wrench in the assessment of market conditions, and hedging bets prior to Election Day has likely been driving recent volatility.

 

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New Month, New Dividends: Welcome November!

dvdsBaseline Analytics has refined a series of stock and ETF-screening algorithms that pinpoint timely, high-probability trades and investment opportunities.

The results of Baseline Analytics' stock and ETF screens are delivered in a downloadable Excel file.  This file can be sorted to identify various performance and technical criteria to help provide a further edge to your trading and investments. Instructions are provided to guide you through your review. Our goal is to deliver such opportunities at your fingertips, with minimal research and analysis needed on your end.  We do provide a link to Yahoo Finance for each of our timely picks should you want to delve further into particular equities or ETF's.

Baseline Analytics has published its list of the stocks going Ex-Dividend in September that exhibit favorable technical trends. Perhaps a dividend-payer or two will emerge as a timely, attractive investment. 

This list is offered free of charge.  Please check out our Premium Services , currently offered as OPEN ACCESS!

Click here for the list.

Subscribers to Baseline Analytics receive our proprietary screens regularly, and this screen in particular will be honed even further for more targeted opportunities, including noteworthy fundamental and technical criteria.  Receive these updates as well as our TrendFlex family of market trend signals and risk assessment tools as a subscriber to Baseline Analytics.

Profitable investing!

Baseline Analytics

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Some Risk to Equities Bubbling Under the Surface

A brief update on two TrendFlex Indicators that are beginning to support a tactical move to hedge long equity positions.

Note below that the TrendFlex Classic CR (Credit Risk) as shown in the chart below is beginning to converge with its moving average line (see solid black line and dotted blue average line).  A close below the moving average would signal a sell signal for equities.  Classic CR is a short to medium-term market trend indicator.

tfcr10262016

Here we have the NYSE Summation Index.  Note the rectangles- the one on the left shows a bullish trend (S&P 500 is green line) while the red NYSI line is above the 400 level,  and conversely (rectangle on the right) when the NYSI is below 400.  Market timing is not perfect here, but it does provide us a sense of the risk character of the current environment.

nysi10262016

It may be time to hedge longs, especially as we get closer to the general election.  A short position or two in e-Mini S&P 500 futures can provide a bit of cushion to long positions.  

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What Is Dow Theory Telling Us About the Health of the Market?

Dow Theory technicals are improving.  We look for confirmation in both the Dow and the Dow Transports.  A bullish environment for stocks is expressed when both hit new highs within a close timeframe of eachother.

Note the chart below.  We had a divergence when the Dow hit a new high July while Transports were bottoming yet firming.

Since then, the Dow has consolidated its gains from that high, while Transports have begun to show a firming uptrend. They have a ways to go to reach a new high, but the trend is constructive for bullish support for equities.

 

DT10252016

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