This free-to-view area features articles from Investors Intelligence analysts and reports and reviews on II’s analysis published on other websites and publications.
The last two months we suggested a “do nothing” strategy as markets drifted sideways. However, in the final dog days of August we noticed some technical potential. Those clues, some of which are reproduced later in the report, caused us to switch from a short/cash stance to substantially long equities.
Our “Investment Portfolio” for instance moved from 100% cash to 80% long equities in the space of just six sessions. It's a fast market; blink and the opportunity will be missed. Current portfolio trades are listed below but before that, we thought we'd mention some stats on our portfolio performance (as it's the most common question from new clients).
To state our own performance figures is often, understandably, met with skepticism. Fortunately for you, an independent third party tracks and monitors all major investment newsletter portfolios within the US. That service, Hulbert's Financial Digest, owned by Dow Jones Newswires, reported in their semi-annual report that all of our active US portfolios beat the Wilshire 5000 Total Return Index over the first two quarters of 2010.
Hulbert's reports that our “US Trading Portfolio” returned +15.7% over the first half of 2010. That outperformed all other asset classes by a sizeable margin (DJIA -5%, S&P -6.7%, Gold +12.7%, Treasury +5.7%, T-Bills +0.1% and so on). Furthermore, Hulbert's consider the “Risk-adjusted ratio” as the most valuable measure of performance; it is based on the Sharpe formula, and rates a portfolio's consistency or performance per unit of risk. For the first six months of the year the US Trading Portfolioscored 1.47. That reading over the first half of 2010, rates our “US Trading Portfolio” the joint 3rd best out of the 500 they track!
Subscriptions to our services are available for as little $1 a day! A year's subscription can pay itself off after just a few trades and rest assured that we are not risk takers. Hulbert's grade all of our portfolios as low risk - at least 40% less risky than owning the Wilshire 5000! Additionally this much respected newsletter rating service classes our trading strategy with an “A” for clarity, our ideas are not complicated!
To sum up, our track record for 2010, one of the most difficult periods for some time, is excellent. Our view is now bullish and our portfolios reflect that. Charts are forever evolving, so this view could so easily turn come next month's edition but as our past performance shows, our subscribers will likely be positioned accordingly.
Our services are also excellent value for money, amongst the cheapest in the industry, so feel to explore what we have to offer. Below we have taken some extracts from last week's Coe Report, as it provides a taster of our style plus the analysis is still applicable.
So what caused us to turn bullish at the end of August as others were rushing to sell?
Below we have extracted the near-term market view from two of last week's Coe Report's. They give a small insight as to how that intraday service uses technical analysis to read the market and the analysis is still valid.
Coe Report on 30th August
“Last week's reversal by the S&P 500from 1040 has turned the bearish case upside-down. A
potential new, more powerful pattern, in the opposite direction, started to evolve. An inverse head-and-shoulders may be developing with last week's low marking the tip of the right shoulder. This bullish pattern is a lot larger than the smaller bearish pattern we have been monitoring and will likely overpower and negate the latter. Many technical indicators improved last week. Momentum, 14-day RSI, for instance turned up from oversold. Volume behavior turned around, with the NYSE 10-day up down volume indicator, breaking its August downtrend.
We are now reversing our view and are initially looking for a visit to the top of the three month range at 1131. That level is also the neckline of the new large inverse head-and-shoulders and a break of that would activate the pattern and its target, which at 1250, is 18% above current levels! That's a big move and with the risk limited to just under last week's low, we are today increasing our long exposure significantly. It is frustrating to switch direction once again but we have no choice but to follow the swings in this choppy market.”
The Coe Report analyses action during the session, with no less than three reports a week and at least two actionable ideas per report. Reports go out mid session and we advise our trades ahead of time (no front running!). The report uses a range of technical analysis methods that are dependant upon the situation. Methodology and reasoning is explained, so the product has educational benefits too. Further details here.
Coe Report 1st September
“We received some subscriber questions regarding the reasoning behind the recent call for a turnaround. We do not have the space and time to run through all the analytics behind a chart reading but yes, a lot more analysis goes into a report than what appears on these two pages. For instance, another reason for the adoption of the newly bullish view was the Elliott Wave picture. This subject is often met with skepticism but if used correctly, it can prove to be a very powerful tool.
Without getting too bogged down with the finer methodological details, the rally off the late June low by the S&P 500drew a clear leading-diagonal pattern (minor waves 1 through to 5), with overlap as permitted for a first wave. The subsequent decline off the August 9th high (wave 1) was a three wave corrective zigzag. That correction, labeled A, B and C, has classic harmony, in that waves A and C were equal (60 points a piece). A and C were impulsive (five smaller waves each), as was necessary under the rules and likewise B was corrective (three waves). The zigzag also terminated across the Fibonacci 61.8% retracement of the leading-diagonal (1), classic behavior. The termination of the zigzag marked the end of 2 and the deeply bearish sentiment (very important) fulfilled the characteristics of such. The next wave will be a 3 up and under the system's rules, that wave is never the shortest and is often the longest. Third waves are very powerful and traders will get burned if trading in the opposite direction. Coupled to the potential inverse head-and-shoulders pattern, oversold conditions and so on, an aggressive turnaround appeared imminent. The next likely time to use Elliott Wave would be weeks away, when wave 3 nears maturity, as wave proportionality in conjunction with Fibonacci extensions could be used to deduce a termination point ahead of the wave 4 correction. With Elliott it is necessary to have a negation level and in this case, the count would be voided on a break of the recent low (1039.7).”
The Coe Report analyses action during the session, with no less than three reports a week and at least two actionable ideas per report. Reports go out mid session and we advise our trades ahead of time (no front running!). The report uses a range of technical analysis methods that are dependant upon the situation. Methodology and reasoning is explained, so the product has educational benefits too. Further details here.
Weekly buying and selling climaxes
The “US Trading Portfolio” and “Investment Portfolio” listed above are part of the US Hotlinesservice. That subscription also includes full use and access to our website. On the website we have a range of useful technical tools, many of which are unique to us.
One such tool is the counting of weekly buying and selling climaxes. When the markets were putting in a bottom over the final week of August, this tool provided an excellent and quick source for tradable ideas. We actually used it ourselves to pick some of the stocks bought in the portfolios above by scrolling through the selling climax list (weekly Selling Climax occurs when a share makes a new 52-week low but then closes higher for the week). Yeap, its that simple!
A selling climax indicates that a stock has capitulated, and this, like shaking the dead wood from a tree, will strengthen the chart. Essentially, the weaker positions are forced out, alleviating the selling pressure.
The screen shot is how the page looks to our subscribers. Following Friday's close, the list is generated and available from 4:50pm ET. As you can see from the screen short, last week there were selling climaxes by some big name stocks like Intel, Yahoo!, Cisco and Bank of America. Clicking on a stock in the list will display the chart and the settings of that chart can be defaulted to a subscribers own preferred indicators. Again, this chart feature is one of many available to subscribers of the US Hotlines.
Whilst western equity markets have remained within wide volatile ranges for a decade or more, it is fair to say that the government bond markets have broadly maintained their bull run.
Yields, which move inversely to price, peaked in the teens for the USLong Bond in the early 80's and as the chart, right shows, investors have enjoyed a surprising smooth bull run thereafter.
Many market commentators are now putting forward the theory that it is all over for the bond markets - "Helicopter Ben Bernake's" expansionist money supply policies will surely bring inflation in due course. At Investors Intelligence, we're not so sure. We highlight the situation in Japan. Over in the land of the not-so-rising sun asset price deflation has been underway for years. Government bond markets hits yields of circa 1% back in the late 90's, and have barely moved from there since.
So, at least on that basis, US bonds may have further to go. Either way, there will be plenty of opportunities for trading.
Readers of the II Insight may not be aware of our bond market analysis. In addition to our well-known US equity and intermational equity hotlines. we publish a daily Fixed Income Hotline. This service covers the main international bond contracts and benchmarks including US Treasuries, German Bunds, UK Gilts and JGBs. In addition to this we have recently updated the chart library to include the following categories of instrument:
Benchmark International Bonds - prices, yields, futures etc
Bond ETFs
Policy rates
Selected of sovereign and corporate CDS rates
Selected US Corporate and high yield bonds
This month, we are offering a free trial of our Fixed Income Service. Existing subscribers can simply add this to their current package. New subscribers can sign up with no obligation. As usual with our free trials, no credit card details will be taken. Just click here to take advantage of this offer.
Disclaimer
Also available online at www.investorsintelligence.com. Unauthorized forwarding, copying or reproduction of this report will be treated as a breach of copyright. To subscribe, visit the website or contact Investors Intelligence on +1 914 632 0422
To unsubscribe from this newsletter, please click here and hit 'Send'.
This report has been produced and compiled by Investors Intelligence, a division of Chartcraft Inc, and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time Chartcraft and any of its officers or employees may, to the extent permitted by law, have a position or otherwise be interested in any transactions, in any investments (including derivatives) directly or indirectly the subject of this report. Also Chartcraft may from time to time perform other services (including acting as adviser or manager) for any company mentioned in this report. The value of securities can go down as well as up, and you may not get back the full amount you originally invested. Derivatives in particular are high risk, high reward investment instruments and an investor may lose some or all of his/her original investment. If you make an investment in securities that are denominated in a currency other than that of US dollars you are warned that changes in rates of foreign exchange may have an adverse effect on the value, price or income of the investment. The investments referred to herein may not be suitable investments for all persons accessing these pages. You should carefully consider whether all or any of these are suitable investments for you and if in any doubt consult an independent adviser. This report is prepared solely for the information of clients of Chartcraft who are expected to make their own investment decisions without reliance on this report. Neither Chartcraft nor any officer of Chartcraft accepts any liability whatsoever for any direct and consequential loss arising from use of this report or its contents. This report may not be reproduced, distributed or published by any recipient for any purpose without the prior express
