This is a special edition of The Markets and More.
Due to
@TSP_Transfer's request I'll start writting a weekly recap that will appear each Monday starting March 13th.
Good News, Bad News ... Due to unexpected cold weather coming last night my morning activities have been rescheduled for a mid morning start this morning. With this, it now provides me some time to write a recap for the week about the barometer along with what action I plan to take within my own portfolio. My buddies are now drinking coffee and jabbering while I am sitting at another table writting.
Since, I have already written about the barometer and how it is comprised I want cover this again but will concertrate this writting on recent readings and what this means. On March 1st there were feed readings present that I had not seen before. With data stops on the feeds the barometer produced a reading of 130 (overbought) and with the data stops removed the reading dropped to 112 (extremely overbought). On election day the barometer had a reading of 162 indicating the S&P 500 Index was undervalued and close to being oversold based upon the old scaling. (A new scaling follows below). The day President Trump took office the barometer had a reading of 157 (slightly undervalued). As we closed the week of March 3rd the barometer read 135 (overvalued).
The technical strength feed on March 1st had a reading of 84 (the highest I've seen) and on Friday March 3rd it had dropped to a reading of 74, in three days. What is important is that now that I have discovered a decline in the technical strength for the Index I am now with the thouht I should begin a rebalance process within my portfolio and reduce my equity allocation from its upper range limit within my asset allocation towards at least the middle and depending on how March goes perhaps on towards its lower range limit as we move into and through April. Remember, I developed the barometer as an aid to assist me in throtteling my equity allocation within certain ranges. And, I promised I'd let everyone know when I began to scale back. I'll soon be starting this process.
In addition, I recalibrated the bands and the new reading ranges follow. A reading range of 120 (and below) to 131 indicates overbought. A reading from 132 to 144 indicates overvalued. A reading from 145 to 155 indicates fair value. A reading from 156 to 168 indicates undervalued. And, a reading of 169 to 180 (and above) indicates oversold. Remember, the lower the barometer reading indicates there is less value while a higher reading more value.
During the week on March 1st the S&P 500 Index reached a new closing high of 2396 and on Friday it had pulled back and closed at a reading of 2383 for a decline of 0.5%. On, Wednesday March 1st the technical strength feed had a reading of 84 and on Friday closed with a reading of 74 for a decline of 11.9%. This indicates that a good bit of selling pressure is now taking place. Remember the barometer's low was 130 and has now moved up to 135 indicating more value is now present but this comes with a decline in price.
Thanks for stopping by and reading.
I wish everyone an enjoyable weekend ... and, most of all "Good Investing."
Old_Skeet
Comments
Derf
Regards,
Ted
Comment though, the barometer value is easy to follow and understand, but I get lost when you give a lower value with "stops" removed or when you just talk about "technical strength feed" value which I assume is just one of the inputs to you barometer.
Thanks again. You seem to have a self-perfected system which adds value and guidance to your investing. It is very nice of you to share.
Thanks for your question concerning floor and ceiling stops.
The barometer has three feeds. I use a scoring system for each feed that ties into my equity weighting matrix. Once a feed reaches a certain level upward (ceiling) or downward (floor) on its scale it can no longer impact the overall barometer reading as each feed scores a certain percent towards my equity allocation. Perhaps an example will help in better understanding. I'll use the technical strength feed as an example. A T/S score of 75 and above scores 40% equity (floor) while a technical score reading of 30 and below scores 60% equity (ceiling). All the feeds have ceilings and floors. Take all the feed scores and add them up and with Friday's close they totaled the reported barometer reading of 135. Now divided the 135 barometer reading by three and you get 45 which is the equity weighting matrix reading. This is the amount of equity the matrix is calling for within my asset allocation. On election day with a barometer reading of 162 would result in an equity weighting matrix score somewhere around 54%. The Index's recent high on March 1st read 112 without the stops and would have called for a 37% equity weighting which is well below the low mark (or floor) within my portfolio's asset allocation. I compare my current allocation to what the matrix is calling for and make adjustments as I feel warranted along with considering other possible influences such as a fall seasonal strategy where I have historically overweighted equities through fall, winter and early spring and then underweight equities during the summer months.
Thus far, the barometer and equity weighting matrix have been a big aid to help me throttle my asset allocation within certain ranges (of course) as it keeps me from opening new positions and/or adding to current positions in an overvalued and overbought market.
Hopefully, the above helps in better understanding how the barometer and equity weighting matrix function as an aid in helping me in throtteling my equity allocation and weighting within my portfolio.
In addition, by following the barometer daily has given me a better feel (so-to-speak) of the S&P 500 Index's beat.