The Markets and More ... (3/17 update)

Old_Skeet

The Markets & More Sunday March 12, 2017

Good evening,

Friday the S&P 500 Index closed at 2,372.60 for a weekly loss of 0.44%. The three best performing sectors this past week were technology, health care and consumer staples. Year-to-date the Index is up 5.97% while the US 10 Yr closed the week with a yield of 2.585%. Seems market interest rates have been on the rise this month since stocks reached a new all time high on March 1st. I'm thinking, the Fed will raise rates this week to cool things down a bit as inflation now stands at 2.5% over the past twelve rolling months.

http://www.usinflationcalculator.com/inflation/current-inflation-rates/

Old_Skeet’s market barometer has now moved to a reading of 144 which is up from last weeks reading of 135 by 9 points which puts it just short of moving from overvalued into fair value. Two weeks ago the barometer had a reading of 131 putting the Index into overbought territory. The lower the reading on barometer indicates there is less value in the Index while a higher reading indicates there is more value. Since, the Index reached a record high on March 1st. a good bit of energy has been worked off over the past couple of weeks resulting in a higher barometer reading indicating better investment value is now starting to return via improved technicals. Forward earnings estimates are looking good; but, beware they usually get revised. And, with anticipated rising interest rates there is a good chance this will happen as we move throuh the year.

During the week, I reduced my equity allocation by one percent and raised cash by a like amount. I'll probally ease another percent or two out of equities and bubble them close to what my market barometer and equity weighting matrix calls for. I feel now is a good time to start harvesting some of my longterm capital gains through an equity sell down process as I reduce my stock allocation towards a neutral weighting.

Some noteworthy sites that I often visit are linked below for your review and reading enjoyment.

This Weeks Signal
http://decisionmoose.com/Moosignal.html

Morningstar’s Market Fair Value Graph
http://www.morningstar.com/market-valuation/market-fair-value-graph.aspx

The Week That Was (followed by) The Week Ahead
https://www.stocktrader.com/blog/

Trinity Asset Management … S&P 500 Weekly Earnings Update … Another Perspective on S&P 500 Earnings
http://fundamentalis.com/?p=6766

Thanks again for stopping by; and, most of all I wish all “Good Investing.”

Old_Skeet

Old_Skeet

As of Monday (3/13) close Old_Skeet's barometer, for the 500 Index, pulled back two points to 142 maintaining its overvalued reading. With this, the equity weighting matrix suggest an equity weighting of 47% for my portfolio. I am currently at 50% equity (and holding) after my most recent March sells.

I have linked the most recent commentary by Jeffrey Saut of Raymond James for your reading enjoyment.

https://www.raymondjames.com/wealth-management/market-commentary-and-insights/investment-strategy

Old_Skeet

As some technicals have changed the barometer reading has now moved upward 2 points to a reading of 144 keeping it scored as just barely overvalued as of Tuesday (3/14) market close. The earnings multiple continues to look promising. A reading of 145 to 155 will put the 500 Index in the fair value area on the barometer. Remember, a lower barometer reading indicates there is less investment value to be had in the Index while a higher reading indicates more value.

Old_Skeet

With both the sotck and government bond markets moving upward today with the S&P 500 Index, rising 20 points, closing at 2385 also put Old_Skeets market barometer well into the overvalued area by dropping 5 points to a reading of 139.

This is a sizeable movement from the previous 144 reading coming mostly from movement in the number of stocks in the Index rising above their 200 moving average from 76.4% to 80.2% plus the technical strength reading along with the earnings multiple played a role in this movement.

It seems, not only is Trump talking the markets upward so is the Fed with their comments about the improvement in the economy. (I'm thinking this was already known by most). Perhaps, this is warranted but it goes to show how news can, at times, drive the markets. I wonder what kind of market movement will now becoming Thursday and Friday?

From my perspective stock prices have overrun their fundamentals with technicals now being at elevated levels.

With this, I don't regret starting my recent equity trimming process.

And, so it goes ... have a good evening.

Derf

@ Old_Skeet: Nothing wrong taking profit !
Derf

Old_Skeet

Old_Skeet's market barometer closed the day with a reading of 140 ... up 1 point for the day ... and, remains with an overvalued reading (132 to 144) for the S&P 500 Index.

Old_Skeet

The S&P 500 Index closed the week with a reading of 2378 up 5 points for the week. For the rolling week the barometer lost 4 points and closed with a reading of 140 maintaining its overvalued reading (132-144). Remember, the lower the barometer reading indicates there is less investment value in the Index while a higher reading indicates more value. The three data feeds for the barometer are a breath feed, an earnings feed and a technical strength feed. Combined these three feeds produce the barometer reading.

The three best performing sectors for the week were real estate, utilities and technology.

Sometime back, I used the price of the S&P 500 Index to measure its value; however, with the high fequency crowd "HFC" trading off of price movement I begin looking for additional market dimensions to measure the value of the Index over just price alone. Over the past couple of years I have used my barometer with good success and I will explain this in more detail at the end of the month.

I am, by no means suggesting you adopt and follow my concept. I'll be posting this information for a look at other ways I have found to invest in the markets knowningly that I could not compete with the "HFC" in trading and investing. With this, I looked for other metrics to key off of over price as most investing systems key off of price movement. With this, I decided to key off of the movements of other key elements and discount price in my decision making process.

Have a good weekend ...

Old_Skeet