Mr. Palmerton is the Founder of Baseline Analytics, and has 30 years of experience spanning corporate finance, asset management and financial markets research. He has held positions as CFO, Director of Finance, and Financial Management and Analysis roles for Fortune 500 and multi-national firms (ADP, Honeywell, Linde Group) as well as for early-stage and emerging growth ventures). Bob founded Baseline Analytics in 2005. With the objective to utilize technical analysis of the financial markets, coupled with macro-economic trends, Baseline Analytics strives to keep investors on the right side of the market at all times. Bob developed the TrendFlex indicator, comprised of a blend of financial indicators that assess the risk of a change in market trend. Baseline Analytics’ TrendFlex models are utilized as the basis for asset allocation strategies of The Absolute Return Market Trend Portfolio. Mr. Palmerton’s articles and blogs can be found on Seeking Alpha, Finding Technicals and Baseline Analytics.

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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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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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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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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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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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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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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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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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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TrendFlex Score & TrendFlex Signals for 9/29/2017

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TrendFlex Score & TrendFlex Signals for 9/22/2017

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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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TrendFlex Score & TrendFlex Signals for 9/15/2017

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TrendFlex Score & TrendFlex Signals for 9/08/2017

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TrendFlex Score & TrendFlex Signals for 9/01/2017

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TrendFlex Score & TrendFlex Signals for 8/25/2017

  Follow for TrendFlex Signal and Blog Update Alerts!

TrendFlex Credit Risk Premium Signals (CR)

There was no change to the TrendFlex Classic and Allegiance signals this week.     

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 8/7/17 +1.50% -1.50%
TrendFlex Allegiance CR Long 4/13/16 +21.0% +21.0%
Historic Performance        

 

TrendFlex Score

The TrendFlex Score climbed from 1.62 to 1.79 and remains above its three-week moving average, a bearish development. 

TFS08252017 

 

TrendFlex Trend Following Signals (TF)

The TrendFlex Classic TF and Allegiance signals remain in Uptrend.    

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  Cash  8/7/17

0.00%

 

-1.5% 1.900
TrendFlex Allegiance TF Uptrend 5/31/16 +16.3% +16.3% 1.125
Historic Performance          

 

Baseline Analytics Extremes

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. 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. There are no extreme readings this week.

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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TrendFlex Score & TrendFlex Signals for 8/18/2017

  Follow for TrendFlex Signal and Blog Update Alerts!

TrendFlex Credit Risk Premium Signals (CR)

There was no change to the TrendFlex Classic and Allegiance signals this week.     

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 8/7/17 +2.36% -2.26%
TrendFlex Allegiance CR Long 4/13/16 +20.1% +20.1%
Historic Performance        

 

TrendFlex Score

The TrendFlex Score was unchanged at 1.62 and is aboveits three-week moving average, a bearish development. 

TFS08182017 

 

TrendFlex Trend Following Signals (TF)

The TrendFlex Classic TF and Allegiance signals remain in Uptrend.    

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  Cash  8/7/17

0.00%

 

-2.2% 2.3
TrendFlex Allegiance TF Uptrend 5/31/16 +15.5% +15.5% 1.625
Historic Performance          

 

Baseline Analytics Extremes

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. 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. The VIX reading is at an extreme.

VIX08182017

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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TrendFlex Signal Update - 8/17/17

The TrendFlex Classic CR remains in sell mode.  Next support for the S&P500 is 2425 with 2400 as major support.

TFCCR08172017

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TrendFlex Score & TrendFlex Signals for 8/11/2017

  Follow for TrendFlex Signal and Blog Update Alerts!

TrendFlex Credit Risk Premium Signals (CR)

There was no change to the TrendFlex Classic and Allegiance signals this week.     

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 8/7/17 +1.6% -1.6%
TrendFlex Allegiance CR Long 4/13/16 +20.9% +20.9%
Historic Performance        

 

TrendFlex Score

The TrendFlex Score increased from 1.41 to 1.62 and is aboveits three-week moving average, a bearish development. 

TFS08112017  

 

TrendFlex Trend Following Signals (TF)

The TrendFlex Classic TF and Allegiance signals remain in Uptrend.    

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  Cash  8/7/17

0.00%

 

-1.6% 2.10
TrendFlex Allegiance TF Uptrend 5/31/16 +17.7% +17.7% 1.375
Historic Performance          

 

Baseline Analytics Extremes

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. 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. The VIX reading is at an extreme.

VIX08112017

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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TrendFlex Score & TrendFlex Signals for 7/21/2017

  Follow for TrendFlex Signal and Blog Update Alerts!

TrendFlex Credit Risk Premium Signals (CR)

There was no change to the TrendFlex Classic and Allegiance signals this week.     

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 assic CR Long 3/28/17 +4.9% +4.9%
TrendFlex Allegiance CR Long 4/13/16 +22.4% +22.4%
Historic Performance        

 

TrendFlex Score

The TrendFlex Score increased from 1.23 to 1.25 and remains below its three-week moving average, a bullish development. In keeping noting extremes in the TrendFlex Score, this current 1.27 level remains cautiously-bearish as a contrarian signal; a similar low of 1.22 in the week ending March 23 preceded a 44 point decline in the S&P 500.

 

TFS07212017

 

TrendFlex Trend Following Signals (TF)

The TrendFlex Classic TF and Allegiance signals remain in Uptrend.    

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;  11/8/16 +15.6% +15.6% 1.00
TrendFlex Allegiance TF Uptrend 5/31/16 +17.7% +17.7% 1.00
Historic Performance          

 

Baseline Analytics Extremes

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. 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. The VIX reading and Put/Call are nearing extreme levels.

 VIX07212017

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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