TrendFlex Score

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There are no signal changes this week.  Despite an impressive rebound through Thursday, stocks appear wanting to retest their recent lows.  

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic 1 Downtrend 08/24/15 +0.4%
TrendFlex Allegiance 1 Cash 8/24/15 +0.0%
TrendFlex Classic II Uptrend 9/9/15 +0.8%
TrendFlex Allegiance II Downtrend 4/6/15 +5.5%

The TrendFlex Score increased from 2.13 to 2.23, a short-term bearish development, while closing above its three-week moving average.  

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The Portfolio Options Table is more cautious this week, considering the possibility that stocks may retest their recent lows.  

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Click here  for the cumulative returns and trade history for the Baseline Analytics TrendFlex systems since their initial trades

The TrendFlex Classic II (bond risk-premium indicator) signal shifted to an Uptrend following Wednesday's close.  There are no changes to the remaining Classic and Allegiance signals this week.  

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic 1 Downtrend 08/24/15 +0.2%
TrendFlex Allegiance 1 Cash 8/24/15 +0.0%
TrendFlex Classic II Uptrend 9/9/15 +1.0%
TrendFlex Allegiance II Downtrend 4/6/15 +5.3%

The TrendFlex Score decreased from 2.21 to 2.13and remains below its three-week moving average, a short-term bullish development.  

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The Portfolio Options Table is unchanged for the week. 

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Click here  for the cumulative returns and trade history for the Baseline Analytics TrendFlex systems since their initial trades

As noted this past weekend, the TrendFlex Classic II Signal was on the verge of reversing its Downtrend signal. Today, the signal issued an Uptrend (Long) signal for the S&P 500.  The entry price for the new signal will be at the opening price of the S&P 500 on Thursday morning (which will also be the closing price of the Downtrend (Sell) signal.

It seems premature for this indicator to flash a Long signal, given the tranding-range volatility in equities.  We will take the objective view however, and consider this perhaps an early sign of an eventual resumption of the uptrend in stocks. 

To refresh awareness of the difference between the TrendFlex Signals and their results, click here.

Click here  for the updated TrendFlex Classic II chart.

There are no changes to the Classic and Allegiance signals this week, following a 3.4% decline in the S&P 500. 

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic 1 Downtrend 08/24/15 +2.3%
TrendFlex Allegiance 1 Cash 8/24/15 +0.0%
TrendFlex Classic II Downtrend 4/13/15 +9.4%
TrendFlex Allegiance II Downtrend 4/6/15 +7.5%

The TrendFlex Score increased from 2.19 to 2.21 but remains below its three-week moving average, a short-term bullish development. With two weeks below its moving average, the TrendFlex Score may be signaling that the selloff in the markets is getting overdone, and the likelihood of a short-term trend shift is growing. 

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Opportunistic traders (and long term investors seeking value plays) might want to consider adding partial long positions, given that the TrendFlex Score has settled below its moving average. To protect capital, stop limit orders are suggested. 

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Click here for the cumulative returns and trade history for the Baseline Analytics TrendFlex systems since their initial trades

This week, Classic shifted to Downtrend and Allegiance has shifted to Neutral (Cash).  The Traditional indicators remain on Downtrend. 

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic 1 Downtrend 08/24/15 -1.2%
TrendFlex Allegiance 1 Cash 8/24/15 0.0%
TrendFlex Classic II Downtrend 4/13/15 5.7%
TrendFlex Allegiance II Downtrend 4/6/15 3.8%

The TrendFlex Score decreased from its extreme reading at 2.56 to 2.19, and close below its three-week moving average, a short-term bullish development. We believe that this shift may be short-term; recent volatility suggests a series of "back and fill" moves in the indices until they settle down.

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Last week we noted that the Portfolio Options Table recognized the bearish trend, however the high reading in the TrendFlex Score anticipated a short-term bounce in equities (hence the rather opportunistic "long futures & options" bullet below).  It was some bounce from the lows! This week we have removed the "long futures & options" as further short-term caution, anticipating that the bounce may have already played itself out. 

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Click here for the cumulative returns and trade history for the Baseline Analytics TrendFlex systems since their initial trades

The "uptrend" TrendFlex Classic and Allegiance signals took it on the chin this week as the S&P 500 sunk 5.7%. VIX and CBOE Put/Call Ratios hit extreme fear levels not seen since the October 2014 Ebola crisis.

As typical with market timing systems, circumstances develop that nullify technical analysis-based systems and highlight one or two technical conditions that forewarned of a trend shift even though the major trend appeared intact.  Such circumstances that have surfaced in the prior weeks include declining market breadth while the indices pushed to new highs, as well as modest VIX readings.

In fact, our Classic and Allegiance signals based on a risk premium indicator in Corporate vs. Treasury debt, which were our flagship signals from 2011 through 2014, flashed "Sell" signals as early as 4/6/15.  We chose to abandon these indicators given the impending shift in Federal Reserve policy toward a more hawkish stance (these indicators remain a component of the TrendFlex Score calculation).  Those "traditional" Classic and Allegiance signals would be up 6.7% and 4.8% today, respectively.  

Baseline Analytics will begin to provide the results of these alternative systems plus additional commmentary to pull it all together, on a weekly basis.  Additionally, we will continue to provide our "Top 5" timing systems for SPY and other top ETF's to lend further support to market positioning. Commentary will attempt to consider all systems and assess the risk/reward of long or short positions on a comprehensive basis, while tracking the results of each of the four TrendFlex systems. 

This week, Allegiance has shifted to Neutral with a score of 2.25.  Classic has shifted to Bearish at a score of 2.60.   The Traditional indicators remain on Downtrend signals established in April.

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic 1 Downtrend; shift to sell 8/24/15 05/15/15 -7.1%
TrendFlex Allegiance 1 Neutral; shift to cash 8/2415 11/03/14  -2.3% 
TrendFlex Classic II Downtrend 4/13/15 6.7%
TrendFlex Allegiance II Downtrend 4/6/15 4.8%

The TrendFlex Score increased from 2.17 to 2.56, which is the highest (and most extreme) score recorded since the 2.62 score recorded in May, 2012. Given the extreme reading in the TrendFlex Score, as well as the high readings in VIX and the CBOE Put/Call ratio (see our Baseline Analytics Blog posted midday Friday), we will be looking for a bounce in equities. One likely scenario may be a modest bounce Monday morning, followed by new lows, then a sustained bounce into the close.  We are not convinced yet that the market will bounce and recover quickly as it has several time so far this year, although as Investor's Business Daily has pointed out this weekend, many good follow-through days have occurred in August.

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The Portfolio Options Table is recognizes the bearish trend, however the high reading in the TrendFlex Score anticipates a short-term bounce in euquities (hence the rather opportunistic "long futures & options" bullet below).  

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Click here for the cumulative returns and trade history for the Baseline Analytics TrendFlex systems since their initial trades

The TrendFlex Classic and Allegiance signals strengthened a bit on the week following this week's .67% increase in the S&P 500. The Classic signal has improved on the week, as the TrendFlex Score as noted below has turned more bullish.  

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic Uptrend 05/15/15 -1.4%
TrendFlex Allegiance Uptrend  11/03/14  +3.6% 

The TrendFlex Score decreased from 2.25 to 2.17 and closed below its three-week moving average, a bullish development. 

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 The Portfolio Options Table remains bullish with a slight improvement.   

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Click here for the cumulative returns and trade history for the Baseline Analytics TrendFlex systems since their initial trades

The TrendFlex Classic and Allegiance signals weakened a bit following this week's 1.25% decline in the S&P 500. The Classic signal shifted from Uptrend to Neutral. 

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic Uptrend 05/15/15 -2.1%
TrendFlex Allegiance Uptrend  11/03/14  +2.9% 

The TrendFlex Score increased from 2.20 to 2.25  and remains above its three-week moving average, a bearish development. 

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 The Portfolio Options Table remains bullish but increasingly cautious, with no change from last week.  

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Click here for the cumulative returns and trade history for the Baseline Analytics TrendFlex systems since their initial trades

The TrendFlex Classic and Allegiance scores improved on the week, and both maintain their uptrend signals. As the short-term market bounce approaches the top of its recent trading range, we are becoming more cautious.  Not sure what catalyst can propel the indices to new highs as we continue through a traditionally weak season.

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic Uptrend 05/15/15 -0.9%
TrendFlex Allegiance Uptrend  11/03/14  +4.2% 

The TrendFlex Score increased from 2.13 to 2.20  and remains above its three-week moving average, a bearish development. The market bounced at the recent score high of 2.42 as reported in our intra-week update, which turned out to be a profitable short term bullish trade. The weekly TrendFlex Score has languished over 2.0 and does not display any strong indication of a strong uptrend resuming.

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 The Portfolio Options Table remains bullish but increasingly cautious.  We recommend keeping stops in place and raising income with covered call writing on profitable holdings.  We are cautious toward adding any long positions at this time.

POT07242015 

Click here for the cumulative returns and trade history for the Baseline Analytics TrendFlex systems since their initial trades

The TrendFlex Score jumped from 2.13 to 2.42 following Monday's close, suggesting that the equity markets are ripe for a bounce.  This level of the score has in the past coincided with a resumption in the short-term uptrend.  We caution however that any bounce may be followed by resistance pressure from traders looking for an exit, as we may simply see a "tradeable rally."

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