OTM Market Update – Inspection

The best way to understand the market is to look at it in various timeframes.

Below is a picture of the S&P since 1982.  The shaded areas are official “recessionary” periods.  At a weekly level the technical model is saying Sell in all periods.  So we start with the overarching long term trend as downward.

02282016 GSPC W

 

 

 

 

 

 

A Daily view of the S&P also reveals weakness.  The technical model is Sell in the Intermediate and Long term, consistent with the broader Weekly view.  Note that the S&P is a BUY in the short term view.

02282016 GSPC D

 

 

 

 

 

 

An Hourly view of the S&P reveals short term emerging strength.  The technical model is SELL in the hourly long term and intermediate term, but BUY in the near term hourly period.

02282016 GSPC H

I believe what we are seeing is a short-term upward movement in the market but in the context of a broader, long term downward market.

Turning attention to Bonds, the TLT ETF (Long Term Bonds) have been strong.  On a weekly basis going back to 2010 the technical model is BUY in short and medium terms particularly in the past 18 months.

02282016 TLT W

 

 

 

 

 

 

A Daily view of TLT reveals recent strength.  It is now BUY in all periods.  In some respects this is a confirmation of investor anxiety reflected in the high VIX and continuing concern about the market in general.  It is also a reflection of the belief that the Fed has no room to further raise rates with an economy that is weaker than the Administration is advertising.

02282016 TLT D

 

 

 

 

 

 

An Hourly view of TLT confirms the above.  TLT has been a BUY on the hourly chart since late January.

02282016 TLT H

 

 

 

 

 

 

We are watching DOG, the inverse ETF, for an investing opportunity.  There was an opportunity for investing back in mid-December, but the opportunity expired with a profit at the end of January.  I will continue to keep you posted on the opportunity.
02282016 DOG H

 

 

 

 

 

 

Overall, the recommendation for intermediate term investors (not short term traders) is an 80% fixed income / 20% market equity allocation as we protect principal and wait for a trend in this market.

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