TrendFlex Score

Market risk assessment tools and tactical investment opportunities driven by curated financial insight

The TrendFlex Classic score improved to Uptrend on the week (entry price will be Monday's opening price of the S&P 500).  All other TrendFlex signals remain in downtrends, despite the 3.26% gain in the S&P 500 this week, as technical resistance points loom further ahead on the upside.  

Most major indices have entered overbought levels following the August selloff.  Many market technicians are viewing this current bounce as a counter-trend rally.  

 

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic 1 Downtrend; Shift to Uptrend 10/12 08/24/15 -2.5%
TrendFlex Allegiance 1 Downtrend  8/24/15 -3.0%
TrendFlex Classic II Downtrend 9/28/15 -4.3%
TrendFlex Allegiance II Downtrend 4/6/15 +2.5%

The TrendFlex Score decreased from 2.32 to 1.98 and closed below its three-week moving average, a bullish development.  

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There is a more bullish shift to the Portfolio Options Table this 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 Allegiance signal shifts from Cash to Downtrend at Monday's open.   TrendFlex Classic shifted to a Downtrend effective with Monday's market open.  Other signals remain unchanged.  

Despite an impressive bounce from near the August lows, technical damage supports continued range-trading.  Surpassing the 2000 level on the S&P 500 will be key as to whether a sustained uptrend can be established.  We have been selling covered calls and identifying some opportunistic shorts to help hedge long positions.

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic 1 Downtrend 08/24/15 -0.7%
TrendFlex Allegiance 1 Cash, shift to Downtrend 10/5/15 8/24/15 +0.0%
TrendFlex Classic II Downtrend 9/28/15 -1.1%
TrendFlex Allegiance II Downtrend 4/6/15 +5.8%

The TrendFlex Score decreased from 2.36 to 2.32 (from Monday's intra-week update), while closing above its three-week moving average.  

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There is no change to the Portfolio Options Table this week.  

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

Monday's TrendFlex Score closed at 2.36, nearing heights previously associated with short-term bottoms in the equity markets.  Despite the technical carnage (which is clearly self-reinforcing as chart-followers and technical trading algorithms all follow the same tune - have we heard enough about that death cross yet?), stocks with compelling valuations are beginning to surface.  We prefer to see a reading in the 2.50 range to add to longs, but we may dabble a bit at this juncture.

See the chart below, where peaks in the TrendFlex Score coincide with trend shifts to the upside.

TFS09282015

 

 

 

9/25/15 Update:

Classic Traditional will shift to a downtrend at Monday's open, following a brief uptrend signal.  There are no signal changes othewise for this week.    

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic 1 Downtrend 08/24/15 +1.8%
TrendFlex Allegiance 1 Cash 8/24/15 +0.0%
TrendFlex Classic II Uptrend; shift to Downtrend on 9/28 9/9/15 -0.5%
TrendFlex Allegiance II Downtrend 4/6/15 +6.9%

The TrendFlex Score decreased from 2.23 to 2.17, while closing even with its three-week moving average.  

 TFS09252015  

There is no change to the Portfolio Options Table this week.  

POT09182015 

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

Classic Traditional will shift to a downtrend at Monday's open, following a brief uptrend signal.  There are no signal changes othewise for this week.    

TrendFlex Signal Trend Signal Date Performance
TrendFlex Classic 1 Downtrend 08/24/15 +1.8%
TrendFlex Allegiance 1 Cash 8/24/15 +0.0%
TrendFlex Classic II Uptrend; shift to Downtrend on 9/28 9/9/15 -0.5%
TrendFlex Allegiance II Downtrend 4/6/15 +6.9%

The TrendFlex Score decreased from 2.23 to 2.17, while closing even with its three-week moving average.  

 TFS09252015  

There is no change to the Portfolio Options Table this week.  

POT09182015 

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

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.  

 TFS09182015  

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

POT09182015 

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.  

 TFS09112015  

The Portfolio Options Table is unchanged for the week. 

POT09042015 

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. 

TFS09042015  

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. 

POT09042015 

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.

TFS08282015  

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. 

POT08282015 

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.

TFS08212015  

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).  

POT08212015b 

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

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