No fireworks yet
By Colin Twiggs
November 5th, 2015 6:30 p.m. AEDT (2:30 a.m. EST)
Advice herein is provided for the general information of readers and does not have regard to any particular person's investment objectives, financial situation or needs. Accordingly, no reader should act on the basis of any information contained herein without first having consulted a suitably qualified financial advisor.
Research & Investment: Performance at 31st October 2015
The S&P 500 Prime Momentum strategy returned +13.24%*, compared to +5.20% for the S&P 500 Total Return Index.
We reduced exposure to equities on 21st August 2015 and will maintain a strong cash position until macroeconomic and volatility filters indicate market risk has declined.
The ASX 200 Prime Momentum strategy continues to trail the benchmark index after sharp falls in Sirtex (SRX) and Resmed (RMD) earlier in the year. Performance for the 12 months ended 31st October 2015 narrowed to -5.79%*, compared to -0.74% for ASX200 Accumulation Index. Concentrated portfolios are more volatile because of high exposures to individual stocks, but they also tend to perform better in the long-term — which is why we recommend a minimum investment horizon of 5 years.
Cash holdings are 45.8% of portfolio value, while macroeconomic and volatility filters continue to indicate market risk is elevated.
* Results are unaudited and subject to revision.
North America
The S&P 500 is testing resistance at the previous high of 2130. Down-turn on 21-day Twiggs Money Flow warns of short-term selling pressure; a fall below zero would indicate strong resistance. Reversal below 2050 is unlikely, but would indicate another test of primary support at 1870.
* Target calculation: 2000 + ( 2000 - 1870 ) = 2130
A declining CBOE Volatility Index (VIX) indicates market risk is easing.
NYSE short sales remain subdued.
Nasdaq 100 broke resistance at 4700 and is approaching its previous (March 2000) high of 4816. 13-Week Twiggs Money Flow is rising steeply but expect resistance at 4800. Breakout would be a positive sign for the large cap S&P 500 and Dow Industrial indices.
Canada's TSX 60 is far more hesitant, testing stubborn resistance at 825. Breakout would signal a fresh advance, but follow-through below 800 would be bearish and failure of 775 would warn of another decline. Recovery of 13-week Twiggs Momentum above -5% would offer some hope, but the index remains tentative.
* Target calculation: 775 - ( 825 - 775 ) = 725
Europe
Germany's DAX is consolidating below resistance at 11000; a bullish sign. Recovery of 13-week Twiggs Money Flow above zero indicates medium-term buying pressure. Breakout above 11000 and the descending trendline would suggest another test of the previous high at 12400.
The Footsie is similarly testing resistance at 6500. Breakout would suggest another test of the previous high at 7100. 13-Week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Reversal below 6250 is unlikely, but would warn of another test of primary support at 6000.
Asia
The Shanghai Composite Index is testing resistance at 3500. Rising 13-week Twiggs Money Flow indicates buying pressure. Breakout would signal an advance to 4000, but I remain wary because of government intervention.
Japan's Nikkei 225 is testing resistance at 19000. Breakout would signal another test of 21000. Respect is less likely, but reversal below 18500 would warn of another test of primary support at 17000.
* Target calculation: 19000 + ( 19000 - 17000 ) = 21000
India's Sensex is testing the former primary support level at 26500 after encountering resistance at 27500. Rising 13-week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Respect of 26500 is likely and would indicate continuation of the rally (to 28500). Failure of support would warn of a primary decline.
* Target calculation: 25000 - ( 27500 - 25000 ) = 22500
Australia
The ASX 200 is testing medium-term support at 5150. Reversal of 21-day Twiggs Money Flow below zero indicates medium-term selling pressure. Breach of 5150 is likely and would warn of another test of primary support at 5000. Recovery above 5400 is unlikely at this stage, but would suggest an advance to 6000.
* Target calculation: 5000 - ( 5400 - 5000 ) = 4600
We aren't born with the ability to make good decisions; we learn it.
~ Ray Dalio, Bridgewater Associates
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