ETF Cycles Review

Market Overview for 11/13:

Overview

The commodity research bureau index above is updated after I have finished writing and posting. It will always say 0 for today, the 5-day is probably more important anyway. Oil, not shown declined to under $75 per barrel today, lowest price since 2010. In addition the other big loser for today; Gold mining index minus 1.31% on the day.

Major equity indexes traveled to new or at least multi year highs before giving some back late. Wal-Mart (WMT), which reported better-than-expected earnings rose to a new all-time high.

wmtIgnore the relative strength on the WMT chart as that is a monthly chart not a daily. The moving average therefore is 126 months or 12.5 years. 😉

Another Madoff? Forex Investors May Face $1 Billion Loss as Trade Site Vanishes I am sure you all know this but if it seems to good to be true, it probably is. Making 1% per day, without any losing days and your principal is guaranteed  😉

Sector & Asset Class Watch:

On a day where the major averages moved to new multi-year or all-time highs only 27 of our 80 sector and industry group ETFs advanced on the day, that is only about 33% participation. Disappointing!

Screen Shot 2014-11-13 at 7.03.54 PMOn the back of Walmart and other strong retailers the leading sector ETF today; retail. Followed by real estate, technology, and consumer discretionary. Three of those top 10 are also listed as overweight on a six month basis:

Screen Shot 2014-11-13 at 7.10.25 PMRTHBreakouts are convincing, at least to me, when you have a volume surge as you see above.

ETF Cycles

Looking across major indexes the year to date gains range all over the place from about 6% to 16%. This is not necessarily the best way to judge you’re trading since all methods, even buy and hold have their ups and downs.  Unless you’re dealing in the very long term it can be tough to tell exactly where you are in the cycle.

That being said my cycles program is ahead on a year to date basis, counting our one open position a little over 11%.

Screen Shot 2014-11-13 at 11.29.21 AM

There are a total of 42 trades or about 4 per month, not overtrading at all. The account capital bold numbers signify a new high for the year. Here is how this is run if you care to follow along, XLU is our only open position lets took at the chart with cycles plotted.

xluThe black arrow shows where the system went long (on the open). Looking at the cycle in the bottom window you can see the sine wave going into and coming out of a bottom. A window of opportunity exists between the black vertical lines. Between those lines we must close above the Chandelier exits. If that does not occur then no trade occurs. I use the opening price next day for tracking purposes only, I am quite sure you could do better.

You can replicate the Chandelier by using the free Stockcharts.com. They have a chandelier exit but use slightly different parameters. The chart above is a 14-day with an ATR equal to 3. Put that in the stock charts and you should have the same number.

The average holing period is 47 days but that is skewed by two trades over 100 days in length.

Not for everyone! The cycles watch list is updated on Fridays and takes only those with a correlation exceeding 0.8. If you are looking at one and would like a chart like above just send along an email and you will have it.

Today’s Reports and Earnings:



Talking Points and Gary Shilling on the State of Real Estate: 

Beating The Bogle Math On Investment Returns (Servo)
Stock Returns After Periods of Above Average Performance (Wealth of Common Sense)
Gold Sentiment – A Contarian’s Dream? (Acting Man)
What the stock market can teach you about your own personality (The Guardian)
How Low Can the Price of Oil Plunge? (Wolf Street)
Identifying the Biases Behind Your Bad Decisions (HBR)
Former Fed Chief at Odds With How Central Bank Now Makes Policy (Real Time Economics)
Why Are So Many Workers Still Part Time? Seven Charts (Real Time Economics)
Better Be A Shovel-Ready Future (Alhambra Prtnrs)
Why We Lost: Retired U.S. General Calls for Public Inquiry into Failures of Iraq, Afghan Wars (Democracy Now)
Landing on a Comet, 317 Million Miles From Home (NY Times)
Banks Manipulated Foreign Exchange in Ways You Can’t Teach (Bloomberg View)
Some nonfiction books I really like (Noahpinion)
BMW Sees Sports-Car Heyday Over as Super-Rich Eyes Wander (Bloomberg)

Gary Shilling on the State of Real Estate

Have a Great Day!