Weekly Cycle: Market Outlook for 08.13.2018
Each week, we review the stock market using a specific set of information sources in order to cut through the noise generated by media publishing attention grabbing headlines. Weekly updates give e the opportunity to play trends while not overreacting on a daily basis.
“Einstein also recognized the power of simplicity, and it was the key to his breakthroughs in physics. He noted that the five ascending levels of intellect were, “Smart, Intelligent, Brilliant, Genius, Simple.” For Einstein, simplicity was simply the highest level of intellect.”
Performance of a handful of macro indexes, as well as index and ETFs on specific sectors of particular interest.
- SPY relatively flat over last month
- CQQQ down over 10% over last month at nearly 15% over last 90 days
- QQQ up over 7% over last 90 days
Based on data and info from TradingView (Click for 30% off a pro subscription)
Scores based on the cumulative total of positive and negative technical indicators signals over three time horizons on Trading View. Scores are weighted by multiplying total as follows: daily (x 1) weekly (x 2), and monthly (x 3).
- SPY, VTI continue to show bullish trading signals
- QQQ remains very strong
- VFH continues with relatively strong trading signals
- HACK remains somewhat weak
OldProf’s Risk Analysis
Each week, at the Dash of Insight blog, OldProf takes a look at a variety of sources to gauge overall market risk on both a short and long-term basis. He tracks a handful of indexes, economic indicators from respected sources, and volatility indicators. His weekly updates include a discussion of events with potential to effect markets, as well as general insight. Highly recommended reading.
This week, in Weighing the Week Ahead: Don’t Get Framed!:
“Short-term trading conditions continue at highly favorable levels. Actual volatility remains low”
“Here are the most important misleading frames:
The bad driver, constantly watching the rear-view mirror. Adherents of this approach believe the best way to determine future expectations is to look at the past, often an arbitrary period. This may include considering past earnings, past business cycles.
The anthropologist, who insists on humanizing the market. Statements like “This market is trapped in a narrow range and just wants to break out” provide no analytic content. Since most people believe they understand human behavior, but do not know much about group behavior, these statements have unwarranted appeal.
The announcer interprets daily market action as if it were a sporting event. “The bulls need to hold 2820 or look out below.”
The breathless newscaster exaggerates the importance of minor events or modest market moves. “The Dow is 40 points off the low of the day!”
The ideologue uses political viewpoints as a basis for finding investments. Just because a policy is endorsed by a leader you favor, does not mean that it will be effective. And vice-versa.
The weatherman makes lists of headwinds or tailwinds. These are especially easy to distort. There is so much to choose from and any can be made to seem important.
The rationalizer makes excuses for poor decisions. In this viewpoint it is better to be thought right than to be right. The most popular excuse is to blame everything on the Fed.1
Mark Hanna publishes a weekly Market Recap full of charts and insight on news and market trends at StockTrader.
This week, Mark writes in Weekly Market Recap Aug 12, 2018
“When this happens it is usually a good idea for short term traders to go cautious but in this case the indexes have held up quite well”
“The NYSE McClellan Oscillator stayed in the red for a FOURTH week in a row (a full month). When this happens it is usually a good idea for short term traders to go cautious but in this case the indexes have held up quite well.2
Mark Hanna StockTrader.com
Articles of note
“Pricing process is based on mood and momentum – does not affect value of a company”
Prof Aswath Damodaran on Valuation
Jae Jun The Value Investing Blog of Old School Value
“US Market Valuation
Looking at the equity risk premium, price can be justified.
The big question is whether buybacks is trapped cash being returned, or whether it’s going to subside.
Good as long as there’s growth backing the buybacks.
Keep eyes on economic growth.
Start worrying if there is staggering and weakness in economic growth.
I’m not looking at the market, or CAPE or P/E, or other traditional measures, I’m looking at economic growth.
As long as economic growth is solid, I’m okay with the market.3
“Disney is starting to work it’s way toward them both” ( yearly and all-time highs)
The Wonderful World of Disney
Howard Lindzon Howard Lindzon
“I expect the eventual announcement of Disneyflix will pull Disney’s stock out of it’s current base into into the digital subscription age that Wall Street loves.4
“The best investments are the ones that are the biggest no brainers.”
Mohnish Pabrai’s Advice for Value Investors
Jae Jun The Value Investing Blog of Old School Value
“How concentrated is your portfolio & how often do you trade in & out of positions
By the time you get to the 6th position that accounts for 75% of the portfolio. The top two positions, top two or three, might approach 50% of the portfolio.
“Doesn’t technology present a massive risk to gold’s standing as a store of value going forward?”
8 Questions I’ve Been Pondering
Posted August 12, 2018 by Ben Carlson awealthofcommonsense.com
“1. What if gold dies out with the boomer generation? The market value of gold around the globe is estimated at more than $7 trillion. I understand some of the reasoning behind the fact that people still put a lot of faith in the yellow rock — it’s survived as a store of value for thousands of years and can act as an uncorrelated asset.
But isn’t it possible faith in gold could potentially die out with the older generations? Doesn’t technology present a massive risk to gold’s standing as a store of value going forward? I don’t know the answers to these questions and I think it’s going too far in the other direction to assume bitcoin or something similar will completely replace gold. But I don’t think you can rule out the possibility that gold’s value to society could be called into question in the decades ahead.6
“I think that’s how this widening gyre ultimately resolves itself, too. In a big war.”
Things Fall Apart (pt. 1)
Ben Hunt Epsilon Theory
“I think that’s how this widening gyre ultimately resolves itself, too. In a big war.7
“But this “more” has a cost, a cost we don’t see at the time: time with our family.”
Being A Father
Alimov Dmitriy Vitaliy Katsenelson Contrarian Edge
“But this “more” has a cost, a cost we don’t see at the time: time with our family. 8
“That is why I hope, for Tesla’s sake, that Musk’s personal dislike of short sellers did not lead him to tweet out that Tesla would go private
The Privatization of Tesla: Stray Tweet or Game Changing News?
Aswath Damodaran Musings on Markets
“That is why I hope, for Tesla’s sake, that Musk’s personal dislike of short sellers did not lead him to tweet out that Tesla would go private9