For OTM Club Meeting – New Stock – Enstar Group ESGR
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Mark Bates
Article – An experienced investor’s perspective
A very good article from the AAII. I tend to be more of a technical investor, yet the information in this article is applicable to all types and styles of investing.
I find that the older I get, the more that patience, long-term perspective, and analysis are important.
OTM Market Analysis – Are you a Long Term Investor?
Prior Week Market Performance:
- The S&P large caps lost 1.6% last week to 2071.26.
- The Russell 2000 small caps lost 1.3% last week to 1217.52.
- Long Bonds (TLT) lost 4.7% last week to 123.50.
- Asset Allocation Model: unchanged. Stocks (52.5%); Bonds (27.5%); Discretionary (20%)
Last Week’s Commentary: Same as the week before. The correlation between SPY and TLT (S&P to Long Bonds) is 0.28, implying little correlation at all. As long as Yellen and the Fed are going to be cautious about raising rates, TLT and its 2.4% dividend yield is not a bad bet to offset the riskiness of the equity portfolio. That being said, we are nearing the point where we’ll start to shift the bond position from long to short. That point is coming
Investment Club Investments – Technicals ahead of Monday night
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OTM Market Update – More of the Same Repeated
Prior Week Market Performance:
- The S&P large caps lost 0.3% last week to 2104.50.
- The Russell 2000 small caps gained 0.3% last week to 1233.37.
- Long Bonds (TLT) gained 2.4% last week to 129.53.
- Asset Allocation Model: unchanged. Stocks (52.5%); Bonds (27.5%); Discretionary (20%)
Last Week’s Commentary: The overall market is as expected. Stocks continue to creep up and are in the middle of a broadening pattern with good technicals. Long bonds are in a short term correction. Note that they are correcting at about 2x the rate of the large cap market increase, so if you are properly diversified long term at 2x stocks to bonds you are unchanged on balance. Changes are equal that the broad market will go up or go down this week. It is in the middle of a channel. But any change should be relatively mild, and the longer term signs are all positive.
OTM Market Update – More of the Same
Prior Week Market Performance:
- The S&P large caps gained 0.6% last week to 2110.30.
- The Russell 2000 small caps gained 0.6% last week to 1230.04.
- Long Bonds (TLT) lost 1.3% last week to 126.54.
- Asset Allocation Model: Stocks (52.5%); Bonds (27.5%); Discretionary (20%)
Last Week’s Commentary: The technical models have clearly been saying that the market is fine. I have been paying attention to the classic patterns such as triangles and wedges, but should have been paying more attention to the models that I’ve spent so much time building. In looking for an edge, I end up cutting myself with that knife. At this point a market analysis is simple: the market looks healthy. Leading indicators are still looking good. Asset allocation is 45/36 stocks to bonds and the remaining 18% is your call.
OTM Update – Learning to Fly with Instruments Only
Prior Week Market Performance
- The S&P large caps gained 1.6% last week to 2088.48.
- The Russell 2000 small caps gained 0.9% last week to 1216.27.
- Long Bonds (TLT) lost 1.1% last week to 129.52.
- Old Asset Allocation Model: 45.5% Stocks (up from 42%), 36.5% Bonds (down from 41%), 0% Cash, 18% Discretionary.
Last Week’s Commentary: There is still a black swan lurking in the water. The difference between the S&P500 and the broad market in general remains. There continues to be more decliners than advancers in the NASDAQ composite on a day in day out basis as the chart below shows. We are keeping another week’s lookout on the S&P. It needs to clear that 2063 resistance point and stay above it the balance of the week. If it does, the market will run a bit. If it does not, look for a down week for stocks, an up week for bonds, and more of the same until the swan appears.
OTM Update – Critical Point Week 2
Prior Week Market Performance
- The S&P large cap index gained 3.0% last week to 2055.
- The Russell 2000 small cap index gained 3.4% last week to 1205.
- Long Bonds (TLT) lost 3.6% last week to 130.
- Asset Allocation Model: slightly changed at 25% (down from 26%) Stocks, 38% (down from 45%) Bonds, 26% Cash, 10% (unchanged) Real Estate.
Last Week’s Commentary: I think the Asset Allocation model is right. I think that it is time to shift some of your wealth toward bonds, and cash. I think that we are in a risky period here. The market has not moved substantially yet, and the technical models are still optimistic in the medium and long term periods. But I keep waiting for that divergence in the AD Line to hit, and the forming Triangle (some would call it a descending wedge, which is a negative sign) is not a good omen on the horizon.
OTM Market Update – We are At A Critical Point
Prior Week Market Performance
- The S&P large cap index lost 2.8% last week to 1994.
- The Russell 2000 small cap index lost 2.0% last week to 1165.
- Long Bonds (TLT) gained 0.8% last week to 135.
- Asset Allocation Model: materially changed at 26% (down from 44%) Stocks, 45% (up from 39%) Bonds, 17% Cash, 10% Real Estate.
Last Week’s Commentary: The asset allocation model has predictably moved to bonds in light of the short term weakness in the large cap market. But personally I’d give this a week to see a confirming signal in the small and medium caps. Stay put until there is a bit more clarification in direction.
OTM Market Update January 18 – Keep Yer Powder Dry
Prior Week Market Performance
- The S&P large cap index lost 1.2% last week to 2019.42.
- The Russell 2000 small cap index lost 0.8% last week to 1176.66.
- Long Bonds (TLT) gained 1.6% last week to 133.19.
- Asset Allocation Model: materially changed at 44%(down from 52%) Stocks, 39%(down from 27%) Bonds, 17% Optional.
Last Week’s Commentary: room for slight downward trend but technical indicators all indicate BUY in medium and long term periods
This Week’s Commentary: actually for intermediate and long term investors the market is doing exactly what one might expect. You’ll note below that the S&P 500 is staying inside of an ascending trend (just barely), and the Russell 2000 has, as might be expected, reverted to the mean of the year long channel marked by the two red lines. The technical model has appropriately indicated that the S&P 500 is not a BUY in the short term. Long term bonds are moving up at too rapid a pace, but indicative of the underlying anxiety in other world currencies.