Talking technicals

I was interviewed on the Friday, May 31 edition of MarketWatch columnist Chuck Jaffe‘s program: “MoneyLife with Chuck Jaffe”.  Click here to listen to me discuss what I’m currently seeing in my charts.

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Please note that my readings will change without notice,  so please don’t buy or sell solely based on anything you hear in the discussion.

Fish out of water

We’ve received so much rainfall these past few days here in Vermont that fish are crossing the roads. It’s been a soggy, messy Memorial Day weekend. Speaking of messy, it’s already Monday in Asia and the Japanese stock market just opened for trading. The Nikkei 225 is plunging right out of the gate (down 3% as I’m writing.) The Nikkei’s had a remarkable run in 2013, up 40.6%, so the benchmark is obviously entitled to a pullback. However, the 6.5% sell-off on Thursday and Friday is a little steep for my comfort level – it’s the equivalent of a 995 point drop in the Dow. My risk management strategy for Japan stocks has been on a buy signal since Thanksgiving, but I’ve now got a close eye on the exit door.   (Photo credit: Vermont Outdoor Guide Association)

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Please note that my readings will change without notice,  so please don’t buy or sell solely based on anything you read in this blog.

Markets by relative strength

I posted this same ranking about 10 days ago. Japan continues to lead the momentum ranking, while Gold maintains its place dead last. US market averages, in general, moved up.  Bonds, with their low volatility, usually don’t rank high on momentum listings, but the positioning can be helpful in determining which group of bond funds is stronger at the moment. Here’s my ranking as of the May 7 close:

                             Markets by Relative Strength

1.  Japanese equities                                               10.  International equities
2.  Nasdaq 100 index                                              11.  Dow Industrial Average
3.  Nasdaq Composite index                                  12.  Asian equities
4.  S&P 400 index                                                    13.  US high yield bond
5.  Russell 2000 index                                            14.  Latin American equities
6.  European equities                                              15.  US municipal bond
7.  US equities                                                           16.  International bond
8.  Wilshire 5000 index                                          17.  US bond
9.  S&P 500 index                                                    18.  Gold

Each day that Wall Street is open for business I monitor benchmarks for 18 different markets to gauge relative strength. The results help me to identify regions of the world or categories of US stocks currently exhibiting positive momentum. The ranking is derived by applying a proprietary formula which incorporates performance over a variety of time periods, with more weight given to recent price activity. This is just one of many filters I use in determining newsletter model portfolio and managed account client recommendations.