I have not posted in some time but have been refining the technical model. It has been subject to about 25 version updates, and I am preparing for a call on what will likely be a material up or down movement in the market. There is a history of such a thing when the market trades for some time in a narrow range, as it has since July.
In any event, note the technical trend for Largecap, Midcap, Smallcap, Microcap, Longbond, Gold, and Real Estate in the box below. They are all BUY in all periods. That is (historically) unusual, and counter to long term correlation — as you can see by the Correl (correlation) column, these asset groups are not highly correlated yet they are all BUY in the model and generally have all been trending upwards due to the worldwide search for yield.
All of this to the point that it is about time to begin to fly the plane using Instrument Flight Rules instead of Visual Flight Rules, as it is going to start getting stormy. Data typically reverts to its mean, and in this case, at some point, these relationships are going to begin to diverge back to historic patterns.
I have been preparing for such a thing in the model and will be issuing updates appropriately. If you have a particular security that you’d like a snapshot on let me know.
Mark
