The State of the Markets:
Good Monday morning and welcome back to the land of blinking screens. I hope you are buckled in as we've got a big week for the markets coming. So, before we review the state of the market models, let's take a look at what might shape the markets this week.
The news flow actually started to flow before the week began here in the U.S. We started with the reaction to the G-7 meeting, where there was some drama over U.S. tariffs. Next, Italy's new Finance Minister, Giovanni Tira, said nice things about the euro and that his government would block any conditions that would "push toward an exit." This pushed Italian stocks up 2% and helped European equities perk up.
Next up is the historic summit between President Trump and North Korean leader Kim Jong Un. Both have arrived in Singapore and senior officials are busy trying to iron out differences before the actual summit takes place. At stake here is security environment in Asia but there continues to be concerns about what the term "denuclearization" means to both sides.
Then the fun with the Central Bankers begins. First up is the U.S. Federal Reserve. Jay Powell's gang begins its two-day meeting on Tuesday. Just about everyone on the planet expects a 0.25% rate hike on Wednesday and another at the September meeting. However, the real question is about what happens after September. As such, market players will be listening for clues about the possibility of a fourth rate increase in 2018 and what Powell & Co. have planned for next year.
On Thursday, it's Super Mario's turn in the spotlight. No one expects the ECB to make any changes to its monthly QE program, where the bank currently purchases 30 billion euros of bonds. However, analysts will be listening intently to any discussion relating to when/how Draghi plans for ending its QE campaign.
On Friday, the central bank parade comes to a close with the Bank of Japan's meeting. There are no changes expected from the BOJ's "QE Infinity" approach, so this will likely be the least interesting meeting.
In between all the central bank meetings, investors will also get data on retail sales, inflation, and industrial production in the U.S., as well as some important manufacturing numbers out of China.
Oh and lest we forget, the U.S. is also engaged in trade negotiations on different fronts. So, like I said at the outset, it is probably a good idea to have your seatbelt fastened this week as there are any number of items that could cause the ride to become a bit bumpy.
Now move on to the indicators...
I like to start each week with a review of the state of my favorite big-picture market models, which are designed to help me determine which team is in control of the prevailing major trend.
The Bottom Line:
Once I've reviewed the big picture, I then turn to the "state of the trend." These indicators are designed to give us a feel for the overall health of the current short- and intermediate-term trend models.
The Bottom Line:
Next up are the momentum indicators, which are designed to tell us whether there is any "oomph" behind the current trend.
The Bottom Line:
We also focus each week on the "early warning" board, which is designed to indicate when traders might start to "go the other way" -- for a trade.
The Bottom Line:
Now let's move on to the market's "external factors" - the indicators designed to tell us the state of the big-picture market drivers including monetary conditions, the economy, inflation, and valuations.
The Bottom Line:
Each year, NAAIM (National Association of Active Investment Managers) hosts a competition to identify the best actively managed investment strategies. In April, HCR's Dave Moenning took home first place for his flagship risk management strategy.
Want to Learn More? Contact Dave
To understand one thing well is better than understanding many things by halves. — Johann Wolfgang Von Goethe
Wishing you green screens and all the best for a great day,
David D. Moenning
Founder, Chief Investment Officer
Heritage Capital Research
HCR Focuses on a Risk-Managed Approach to Investing
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At the time of publication, Mr. Moenning held long positions in the following securities mentioned: none - Note that positions may change at any time.
COMING SOON: SIGNIFICANT UPGRADE TO DAILY DECISION SERVICE
We are excited to announce that an important upgrade to our service will be implemented within the next month.
First, the CORE risk-managed strategy will take a more growth-oriented approach. Next, the TRADING strategy will focus on 10 individual "top gun" stock positions. Most importantly, all three of our strategies will be run in a single model - what is now the LEADERS model. The goal is to make the service simpler to follow by putting everything in one place.
We will be looking for an opportunity to make the change and implement the upgrade. So, be sure to stay tuned.
Today's Model Review:
LEADERS Model: The LEADERS currently holds 20% positions in the Consumer Discretionary, Technology, Health Care, Financials, and Energy sectors.
CORE Model (Risk Managed Exposure):
Today's CORE model's exposure target: 70%
Current CORE Model exposure: 75%
To review, the goal of this model is to stay in tune with the overall risk/reward environment. Therefore, we make adjustments only when there is a meaningful and sustained divergence between the target model reading and our current positions.
TRADING Model: We currently hold trades in gold, commodities, global technology, and the internet sector.
2018 YTD Performance Update:
DD LEADERS: +6.8%
S&P 500: +3.9%
|Daily Decision Trading Service
Current Portfolio Summary
|The LEADERS Model|
|% of |
|Technology Select Sector SPDR||Buy||20%||12.1.16||$46.64||Buy|
|Health Care Select Sector SPDR||XLV||20%||11.27.17||$81.79||Buy|
|Consumer Discretionary Select Sector SPDR||XLY||20%||2.9.18||$99.67||Hold|
|Financials Select Sector SPDR||XLF||20%||2.12.18||$27.94||Buy|
|Energy Select Sector SPDR||XLE||20%||5.2.18||$73.57||Buy|
|The CORE EXPOSURE Model|
|% of |
|SPDR S&P 500 ETF||SPY||37.5%||4.17.18||$269.78||Buy|
|iShares S&P Small-Cap||IJR||37.5%||4.17.18||$79.83||Buy|
|The TRADING Model|
|% of |
|PowerShares Commodity Index ETF||DBC||25%||5.2.18||$17.43||Buy|
|First Trust Internet Index||FDN||25%||2.26.18||$124.00||Buy|
|iShares Global Technology||IXN||25%||2.26.18||$165.40||Buy|
|SPDR Gold Shares||GLD||25%||4.17.18||$127.27||Strong Buy|
% of Model Explained
The number shown in this column represents the percentage of the the model this position represents.
Current Rating Explained
This is our rating for the day. The Current Rating tells you what action we would take if we did not currently hold the position. A "Buy" rating means we would be willing to purchase the position at current prices. A "Strong Buy" suggests this would be our first choice to buy. A "Hold" rating indicates we would not make new purchases at current levels. And a "Sell" rating indicates we will likely exit the position in the near-term.
Positions Can Change
Positions often change during the trading session. Remember that we will send a Trade Alert via SMS Text Message and/or Email BEFORE we ever make a move in the models.
About the Daily Decision Models:
The Daily Decision is designed to be a simple, easy-to-follow e-letter service showcasing 3 different model portfolios. The LEADERS model is the flagship, growth oriented strategy that focuses on "where the action is" in terms of market leadership. The CORE model is a longer-term, risk-managed approach to keeping exposure to market risk in line with prevailing conditions. And as the name implies, the TRADING model is intended to be a tactical, opportunistic trading strategy.
Disclosure: At the time of publication, Mr. Moenning held long positions in the following securities mentioned: SPY, IJR XLK, XLV, XLY, XLF, DBC, FDN, IXN, GLD Note that positions may change at any time.
Wishing You All The Best in Your Investing Endeavors!
The Front Range Trading Team
NOT INVESTMENT ADVICE. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Investors should always consult an investment professional before making any investment.