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Old_Skeet's Market Barometer Report ... Late Summer & Early Fall Reporting

edited November 2019 in Off-Topic
August Recap and Comments

Old_Skeet's market barometer follows the S&P 500 Index and is driven by three major data feeds. They are 1) an earnings feed that is comprised of both TTM and forward earnings estimates, 2) a breath feed, and 3) a technical score feed. In addition to the three main barometer feeds there are a few other data influences that are often times used. They include (but are not limited to) the yield of the US10YrT, short volumes for the Index, and the Index's dividend yield.

These data readings are entered into a spreadsheet and when scored produce a barometer reading. A barometer reading of 150 is in the middle of fair value and scales upward to undervalued, oversold and extremely oversold when a reading of 168 or higher is reached. Moving in the other direction scales to overvalued, overbought, and extremely overbought when a reading of 132 or below is reached. A higher barometer reading indicates there is more investment value in the Index over a lower reading.

I simply use the barometer as an aid to help me determine when good investment value is found (or to prevail) within the Index itself. Thus far through 2019 the barometer has produced readings ranging from a high of 183 indicating that the Index was extremely oversold, as we opened the year, down to a low reading of 128, during the second week in April, indicating that the Index was extremely overbought.

In review of this months weekly readings, the barometer's average reading was 156 indicating that the Index (on average) was undervalued for the month. For the month, the highest weekly reading of 160 came during the first and fourth weeks indicating the Index was undervalued during this period of time while the lowest reading of 148 came during the last week of the month indicating that the Index was at fair value as we closed the month.

I generally add to my equity spiff positions during times when high barometer readings are present; and, I generally trim equity spiff positions during periods of time when low barometer readings are present. Currently, with a month ending barometer reading of 148 I have the Index rated as a hold due to the barometer's fair value reading. According to the barometer ... the three best months to have been a buyer of the Index came during the months of January with an average reading of 159, of May with an average reading of 152, and in August with an average reading of 156.

I wonder what kind of barometer readings I'll be seeing in September?
_____________________________________________________________________________________________________________

September Comments

As of September 6th market close Old_Skeet's market barometer, with a reading of 142, indicates that the S&P 500 Index is presently overvalued.

As of September 13th market close Old_Skeet's market barometer, based upon it's metrics, indicates that the S&P 500 Index is presently overbought with a reading of 135.

As of September 20th market close Old_Skeet's market barometer, based upon it's metrics, indicates that the S&P 500 Index is presently overvalued with a reading of 141.

As of September 27th market close Old_Skeet's market barometer, based upon it's metrics, indicates that the S&P 500 Index is presently at fair value with a reading of 149. With this, the Index is rated a hold and will not become a spiff buy until a higher reading of better than 160 is reached. The weekly average for the month of September was 142 indicating that the Index for the month was overvalued.

Since, my portfolio bubbles within the parameters of my asset allocation I'm currently building cash while I await a better buying opportunity before I open a new equity spiff position.

With this, I now wonder what kind of barometer readings I'll be seeing come October?
___________________________________________________________________________________________________________

October Comments

As we open October with the recent stock market pullback yesterday along with the resetting the earnings feed, for the 4th quarter earnings estimates, Old_Skeet's market barometer now indicates that the S&P 500 Index is now undervalued with a reading of 156. However, before I give good consideration to opening a new spiff position I'm wanting to see a barometer reading north of 160.

More details to follow.

As of market close October 2nd Old_Skeet's stock market barometer reflects that the S&P 500 Index is now oversold with a reading of 161. With this, I'm thinking there is more downside to come.

As of market close October 3rd Old_Skeet's market barometer with a reading of 160 reflects that the S&P 500 Index is oversold; but, just barely. Seems, there was some program buying today and I'm not sure where this will lead. Remember, in addition to the China trade rift there is the Brexit deadline at the end of this month and the FOMC wizards still have to meet to determine if we will have yet another interest rate decrease. Just last year they were raising rates ... now, it seem they went to far and too fast with their rate increase campaign just to turn around and have to start cutting possibly for the third time this year as the economy slows. And, throw in 3rd quarter earnings reporting, into this mix, and you have a recipe for a lot of volatility during the month of October.

I'm still with my thinking that there is perhaps more downside to come.

As of market close October 4th Old_Skeet's stock market barometer closed the week with a reading of 153 indicating that the S&P 500 Index is at fair value based upon the metrics of the barometer. Unless something happens in the market that would warrant daily comments I'm returning to weekly postings.

As of market close October 11th Old_Skeet's stock market barometer closed the week with a reading of 150 indicating that the S&P 500 Index is at fair value based upon the metrics of the barometer. The yield on the US10YrT, for the week, increased from 1.52% to 1.73%. In comparison, I'm finding the yield of the S&P 500 Index is listed at 1.94%. So, the yield advantage remains with stocks. Interestingly, short volumes on the Index were up this past week. With this, it seems some investors are looking for a pullback.

As of market close October 18th not much changed during the week with Old_Skeet's stock market barometer which closed the week with a reading of 150 indicating that the S&P 500 Index (SPY) remains at fair value. Even though the Index increased in valuation form 2970 to 2986 there was good selling pressure in the Index. Short volume declined for the week but remains elevated with a bias towards the shorts

As of market close October 25th Old_Skeet's stock market barometer which follows the S&P 500 Index (SPY) closed the week with a reading of 145 indicating the the Index is just barely overvalued based upon the metrics of the barometer. The yield on the US10YrT has now increased to about 1.8% while the yield on the Index is at about 1.9%. With this, the yield advantage remains with stocks. Even though the valuation of the Index moved from 2986 to 3023, for a 1.2% gain for this week, short volumes remain elevated. So, a good number of investors are betting against this stock rally. Should they have to cover their short positions this could create more demand for stocks and move stock prices even higher. It will be interesting to watch to see how this plays out.
_________________________________________________________________________________________________________

November Comments

As of market close November 1st Old_Skeet's stock market barometer which follows the S&P 500 Index (SPY) closed the week with a reading of 142 indicating that the Index is overvalued based upon the metrics of the barometer. The yield on the US10YrT moved fom 1.8% down to 1.72% as Treasuries gained in value while their yield fell. I'm finding that the yield on the 500 Index is listed at about 1.9%. With this, the yield advantage remains with stocks. The valuation for the Index moved from 3023 to 3067 for a gain of about 1.4% as shorts began to cover their positions during the first part of the week before short volumes began to turn upwards towards the end of the week. It will be interesting to see in the coming week(s) if the Index can continue its upward march with the short volumes increasing towards the end of the week. It seems some investors are looking for a pullback.

For me, I'm opening November at about 2% heavy in stocks and chose not to rebalance from recent strong upward stock market movement. Generally the 4th and 1st quaters have historically offered up the better returns for stock investors. Plus, I'm thinking that yearend capital gain distributions from many of my equity funds will perform an automatic rebalance of sorts as I take all dividend and capital gain distributions in cash being in the distribution phase of investing (retirement).

Thanks for stopping by and reading.

Trailing comment ... Here is a bit of news that I picked up in my Sunday evening reading that supports the shorts. Freight and Rail Traffic Slows 8% in October ... https://www.zerohedge.com/economics/freight-railroad-traffic-plunged-8-end-october

Wonder what our FOMC wizards will do now? Remember, a year ago they were on a march to increase rates. Thus far this year they have cut three times. Will more rate cuts follow? My thinking ... Perhaps. For me I'll be watching my risk on assets more closely. Remember, though, GM has been on strike for better than a month.

Now a link that supports the bulls. From Momentum Monday it is titled "Stock Market Hits All Time Highs as Nancy Pelosi Creeps Closer to Presidency."

https://howardlindzon.com/momentum-monday-stock-market-hits-all-time-highs-as-nancy-pelosi-creeps-closer-to-presidency/

Comments

  • edited September 2019
    Hi sir . How much stocks are you holding now , 40s%?! Thx so much. enjoy holiday.
  • edited September 2019
    Hi @johnN: Thank you for your question.

    My asset allocation of 20% cash, 40% income and 40% equity allows for some tweaks, from time to time, based upon my read on the markets. My threshold rebalance is + (or -) 2% from the above "neutral" asset allocation. In addition, I can tactically overweight (underweight) my equity and income areas by up to 5% if felt warranted. Currently, I am at about 15% cash, 40% income and 30% growth & income and 15% growth. At this time, this puts me at 45% equity. I am now 5% overweight in the growth & income area of my portfolio mostly in dividend paying equity mutual funds. This is due, in part, to the low yield now coming from most bonds. During the past six months, or so, the US10YrT has moved from a yield of about 3.25% down to a yield of about 1.5% as investors have sought safety in bonds over stocks driving the price of most bonds upward. However, from my perspective, this has created an opportunity to invest in some good dividend paying equity mutual funds that actually have a higher yield than the current US10YrT. I'm now seeing some good appreciation in these positions. In addition, I have a small spiff position open at this time that is in the money in the growth area of my portfolio as well.

    Since, I retired, and over the past five years, I have been moving my portfolio more towards more income generation over capital appreciation although some growth of principal is important to offset inflation. This is what I look for the growth area of the portfolio to accomplish, over time, while I look for the income and growth and income areas to provided the income that I now seek.

    When I decide it is time to trim my equity allocation (which is presently five percent heavy at this time) I can trim from the spiff position or from me being overweight in the dividend payers or some form of both.
  • Thx so much
  • Hi again @johnN, You might find this recent post of mine of good interest. I have linked it below for your reading enjoyment. It is titled ... "August in Review and September's Outlook!"

    https://www.mutualfundobserver.com/discuss/discussion/52500/august-in-review-and-september-outlook
  • edited September 2019
    September 6th Update

    As of September 6th market close Old_Skeet's market barometer, with a reading of 142, indicates that the S&P 500 Index is presently overvalued. With this, I plan to close out my most recent spiff position, that I opened on August 6th, with about a 3% net profit.
  • I may have mentioned on another thread that I had also initiated a trading position in CAPE at almost the same time as Old_Skeet entered his spiff. I have a 3+% gain, also. Somebody’s telling me I should sell Monday. I could do a lot worse looking for a signal elsewhere.
  • edited September 2019
    September 13th Update

    Old_Skeet's market barometer closed the week with a reading of 135 indicating that the S&P 500 Index is currently overbought based upon it's metrics. This suggest that I should give good consideration to begin the trimming process for the overweight equity position that I carry at this time. Some may remember that I noted in the "Buy, Sell or Hold" thread on September 10th that I had closed out my equity spiff position with a 3.4% profit.

    The link below will take you to the Buy, Sell or Hold thread. Then once opened, scroll down to my September 10th comment.

    https://www.mutualfundobserver.com/discuss/discussion/52532/buy-sell-hold-september

    Closing the spiff position was the first step in my equity trimming process. Now, I'm left to ponder as to where to trim next. Should it be from my good dividend paying equity funds found it in the growth & income area of my portfolio or from some (capital appreciation) growth funds found in the growth area, or perhaps I should consider trimming from each area?

    Again, something to ponder. And, while I ponder ... The link below will take you to what Jeffrey Saut thinks ... Stay with growth as investors will pay up for growth. This may be so ... but, now being retired I'm now looking more towards income generation more so than growth of capital although I feel that is important also to stay ahead of inflation.

    https://www.cnbc.com/video/2019/09/11/wall-street-bull-jeff-saut-suggests-a-market-breakout-is-here.html
  • Thanks for the update.

    Have a nice weekend,Derf
  • I should have held my CAPE for the week. As it was, i cleared only 2.9% and missed out on the rally.
  • @benWp. 2.9% is good for a position you held for a short period. Beats money markets. Nice trade
  • @BenWP, have you thought about putting the sell order in with a trailing stop? That way if the trend is still upward you don't miss it. Doesn't mean you can't get whip-sawed, but one way not to cash out to early.
  • edited September 2019
    Old_Skeet's market barometer, which follows the S&P 500 Index, closed the week of September 20th with a reading of 141 indicating that the S&P 500 Index is currently overvalued based upon the barometer's metrics.

    I generally trim my equity allocation when overbought readings appear and I generally increase my equity allocation when oversold readings appear. Currently, a reading of 141 (overvalued) falls in the lower range of hold.
  • edited September 2019
    Thx sir... No change in plans.. 80/20 full speed ahead

    The past week-
    Added to Vanguard prime cap core vpccx & Vanguard star vgstx in private portfolio
    Also added to vwo and picked up little
    Security Description: Buckeye Partners, L. 4.125% 12/01/2027
    CUSIP 118230-AR-2

    Hagd good weekend
  • Thanks for the barometer report, Old Skeet. It's a very useful confirmatory tool. It seems neither the bulls nor the bears are able to make much headway at the moment.

    Waiting for a 2-3% correction (probably next month) to add to PRDGX, BIAWX, and YAFFX. In pre-election years markets usually show weakness in October then strength for the remainder of the year.

    All I've done so far this month is to stash away a little cash in a 12 month CD @ 2.4%!
  • edited September 2019
    As of September 27th market close Old_Skeet's market barometer, based upon it's metrics, indicates that the S&P 500 Index is presently at fair value with a reading of 149. With this, the Index is rated a hold and will not become a spiff buy until a higher reading of better than 160 is reached. The weekly average for the month of September was 142 indicating that the Index for the month was overvalued.

    Since, my portfolio bubbles within the parameters of my asset allocation I'm currently building cash while I await a better buying opportunity before I open a new spiff position.
  • edited October 2019
    October Comments

    As we open October with the recent stock market pullback yesterday along with the resetting the earnings feed, for the 4th quarter earnings estimates, Old_Skeet's market barometer indicates that the S&P 500 Index is now undervalued with a reading of 156. However, before I give good consideration to opening a new spiff (special investment) position I'm wanting to see a barometer reading north of 160.

    More details to follow.
  • As of market close October 2nd Old_Skeet's stock market barometer reflects that the S&P 500 Index is now oversold with a reading of 161. With this, I'm thinking there is more downside to come.
  • Old_Skeet said:

    As of market close October 2nd Old_Skeet's stock market barometer reflects that the S&P 500 Index is now oversold with a reading of 161. With this, I'm thinking there is more downside to come.

    Buy, Sell or Hold?
  • edited October 2019
    Hi @hank,

    Your question ... Buy, Sell or Hold? It depends.

    For me, if I were short equities I'd be accumulating during the downdraft. Since, I'm not short equities within my asset allocation I'm going to wait another day, or so, to see how this downdraft plays out. Should the markets continue downward I'm thinking somewhere around 2800, or thereabouts, is where I plan to make my first spiff buy step. Until then, for me, its a hold as I'd like to watch the action for a few more days. I'd also like to see all three major feeds solidly in the green and not just on the fringe.
  • edited October 2019
    Thanks @Old_Skeet,

    Of course, “short equities” can have two rather distinct meanings. I’m quite confident you intend it as in “underweight equities.”

    Not much to add. I haven’t liked these markets for a long time. But my “foolish consistency” (borrowing from Emerson) has me invested to some degree and hanging on for dear life. No thoughts of buying. But if I were 10-15 years younger I’d probably be nibbling, while anticipating further declines.
  • edited October 2019
    Hi @hank,

    Yes, if I was short the Index I'd be closing these positions and going long through an average out short and average in long approach. In following the short volumes on the Index for the past three days the short volumes have been dropping. Now I'm waiting for the MFI to reverse and money starting to return as it has been outflowing for the past week, or so.

    In addition, if I was underweight equities within my asset allocation I'd be doing a little buying during the dip. But, since I'm not I'm waiting to see my major feeds be solidly in the oversold range and not just on the fringe before I make my first spiff (special investment) buy step move.

    I'll post again after market close today.
  • edited October 2019
    With market close of October 3rd Old_Skeet's market barometer with a reading of 160 reflects that the S&P 500 Index is oversold; but, just barely. Seems, there was some program buying today and I'm not sure where this will lead. Remember, in addition to the China trade rift there is the Brexit deadline at the end of this month and the FOMC wizards still have to meet to determine if we will have yet another interest rate decrease. Just last year they were raising rates ... now, it seem they went to far and too fast with their rate increase campaign just to turn around and have to start cutting possibly for the third time this year as the economy slows. And, throw in 3rd quarter earnings reporting, into this mix, and you have a recipe for a lot of volatility during the month of October.

    I thought the wizards were suppose to have good insight. I wonder if they might have to possibly cut yet again in December?
  • edited October 2019
    As of market close October 4th Old Skeet's stock market barometer closed the week with a reading of 153 indicating that the S&P 500 Index is at fair value based upon the metrics of the barometer. Unless something happens in the market that would warrant daily comments I'm returning to weekly postings.
  • edited October 2019
    As of market close October 11th Old_Skeet's stock market barometer closed the week with a reading of 150 indicating that the S&P 500 Index is at fair value based upon the metrics of the barometer. The yield on the US10YrT, for the week, increased from 1.52% to 1.73%. In comparison, I'm finding the yield of the S&P 500 Index is listed at 1.94%. So, the yield advantage remains with stocks. Interestingly, short volumes on the Index were up this past week. With this, it seems some investors are looking for a pullback.
  • edited October 2019
    Thx sir... added more Vti vwo before market open today, also bought little MFA over wkend
  • edited October 2019
    As of market close October 18th not much changed during the week with Old_Skeet's stock market barometer which closed the week with a reading of 150 indicating that the S&P 500 Index (SPY) remains at fair value. Even though the Index increased in valuation form 2970 to 2986 there was good selling pressure in the Index. Short volume declined for the week but remains elevated with a bias towards the shorts.
  • edited October 2019
    As of market close October 25th Old_Skeet's stock market barometer which follows the S&P 500 Index (SPY) closed the week with a reading of 145 indicating the the Index is just barely overvalued based upon the metrics of the barometer. The yield on the US10YrT has now increased to about 1.8% while the yield on the Index is at about 1.9%. With this, the yield advantage remains with stocks. Even though the valuation of the Index moved from 2986 to 3023, for a 1.2% gain this week, short volumes remain elevated. So, a good number of investors are betting against this stock rally. Should shorts have to cover their positions this could create even more demand for stocks and move stock prices higher in the days ahead. It will be interesting to watch and see how this plays out.
  • edited November 2019
    November Comments

    As of market close November 1st Old_Skeet's stock market barometer which follows the S&P 500 Index (SPY) closed the week with a reading of 142 indicating that the Index is overvalued based upon the metrics of the barometer. The yield on the US10YrT moved fom 1.8% down to 1.72% as Treasuries gained in value while their yield fell. I'm finding that the yield on the 500 Index is listed at about 1.9%. With this, the yield advantage remains with stocks. The valuation for the Index moved from 3023 to 3067 for a gain of about 1.4% as shorts began to cover their positions during the first part of the week before short volumes began turnning upwards towards the end of the week. It will be interesting to see in the coming week(s) if the Index can continue its upward march with the short volumes increasing towards the end of the week. It seems some investors are looking for a pullback.

    For me, I'm opening November at about 2% heavy in stocks and chose not to rebalance from recent strong upward stock market movement. Generally the 4th and 1st quaters have historically offered up the better returns for stock investors. Plus, I'm thinking that yearend capital gain distributions from many of my equity funds will perform an automatic rebalance of sorts as I take all dividend and capital gain distributions in cash being in the distribution phase of investing (retirement).

    Thanks for stopping by and reading.

    Trailing comment ... Here is a bit of news that I picked up in my Sunday evening reading that supports the shorts. Freight and Rail Traffic Slows 8% in October ... https://www.zerohedge.com/economics/freight-railroad-traffic-plunged-8-end-october

    Wonder what our FOMC wizards will do now? Remember, a year ago they were on a march to increase rates. Thus far this year they have cut three times. Will more rate cuts follow? My thinking ... Perhaps. For me, I'll be watching my risk on assets more closely. Remember, though, GM has been on strike for better than a month.

    Now a link that supports the bulls. From Momentum Monday it is titled "Stock Market Hits All Time Highs as Nancy Pelosi Creeps Closer to Presidency."

    https://howardlindzon.com/momentum-monday-stock-market-hits-all-time-highs-as-nancy-pelosi-creeps-closer-to-presidency/
  • Thanks for the update Old_Skeet.
    Derf
  • @Old_Skeet's commentaries are surely worth the read. Thank you.
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