Breathing On The Trend Line

Ulli Uncategorized Contact

Yesterday’s rally out of the starting blocks fizzled slowly, and all 3 major indexes lost moderately.

Causing this retreat was the release of the minutes from a late April Fed meeting showing that the members see signs of stability, but threats remain and any recovery is unlikely to be quick. The economy is now expected to shrink between 1.3% and 2% this year up from a revised range of 0.5% to 1.3%.

Additionally, the committee anticipates that the nation’s unemployment rate will peak at 9.6% this year and that it could take some five years to get joblessness back to below 5%.

To me, these are rosy assumptions and don’t seem to show any immediate recovery lurking on the horizon. I wonder if and when that message gets to Wall Street.

Nevertheless, trends do what they do regardless and our Trend Tracking Indexes (TTIs) gained, and are now positioned as follows in regards to their long-term trend lines:

Domestic TTI: -0.02%
International TTI: +5.03%
Hedge TTI: +2.22%

The domestic TTI has some sensitivity to interest rates, which is why it moved higher while the overall markets declined. We’re again within breathing distance of a domestic Buy signal.

As I mentioned before, I want to see a clear break above the line and also review the effect when the trend line gets recalculated this Friday. By the time you receive Friday’s update, we may a better idea as to where we stand.

It’s far more important to be diligent in following through when a Sell signal occurs, since markets move down a lot faster than they move up. As a consequence, losses can pile up quickly as we saw in 2008.

Being late in participating in a Buy signal merely means potentially losing out on some profits, which most investors can live with. Stay tuned!

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Comments 5

  1. Ulli,

    A quote from your blog today:

    “The domestic TTI has some sensitivity to interest rates, which is why it moved higher while the overall markets declined. We’re again within breathing distance of a domestic Buy signal.”

    I know that your TTI calculation is confidential, but does your comment imply that the TTI is more than a simple 39 week moving average calculation?

    Thanks,
    Paul

  3. Ulli,

    Could you explain the difference between Smart money and Dumb money. I know the traders lure us unsuspecting people into the market like they have over the last 2 months or so then sell their holdings and then go short and wait till the bag holders start selling again and then cover their shorts and start buying again apparently from the Dumb money people. Is this close to reality?

    Thanks

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