The State of the Markets:
As we enter the final week of what is turning out to be the best January since 1989, the macro drivers of the market remain the same. Cutting to the chase, investors continue to look forward to better days ahead on both the economic and earnings fronts.
In market terms, this is called discounting. And after the President's speech in Davos on Friday, the market appears to be doing some additional discounting to the upside. The tone of the speech was much more conciliatory than feared on the trade front and as such, traders breathed a sigh of relief via their buy orders on Friday. The end result was a surprisingly good day in the market and yet another all-time high for the big-cap indices.
The key point to the current joyride to the upside is that the economy and Corporate America are expected to continue to surprise. Although the tax bill is only weeks old, we are already seeing big announcements from companies large and small. This goes well beyond the $1,000 bonuses and minimum-wage increases for the rank-and-file employees. It's as if a race is on for CEO's to announce big investments and new projects as fast as they can. And the race is likely to continue for some time.
From a macro perspective, this means that America is indeed open for business. And business is looking good. Remember, when companies like Apple (NASDAQ: AAPL) bring home hundreds of billions of dollars, invest in new plants and projects, money pulses through the U.S. economy. New jobs and expansion plans begets more jobs. It's what is being called a virtuous cycle for the economy.
While the stock market's blazing rally is clearly stretched, and the current pace is unlikely to continue for too much longer without some sort of pause, the thinking is that the surprises to the upside from the economy and earnings are just getting started. Thus, FOMO (fear of missing out) has taken over and investors appear to believe there is no reason not be invested in stocks from a longer-term perspective.
Yes, this view is simplistic in nature. However, this is exactly what I attempt to do on Monday mornings. The goal is (a) cut through all the noise and attempt to identify the primary macro drivers and (b) determine the "state of the market" via a review of the indicators. So from my seat, it appears that discounting the improving landscape is the key to the game here.
The art of being happy lies in the power of extracting happiness from common things. -Henry Ward Beecher
Wishing you green screens and all the best for a great day,
Disclosure: At the time of publication, Mr. Moenning held long positions in the following securities mentioned: none.
Note that positions may change at any time.
Today's Model Review:
LEADERS Model: The LEADERS currently holds 20% positions in the Technology, Industrials, Health Care, and Materials sectors - and 20% in Cash.
CORE Model (Risk Managed Exposure): Today's CORE model's exposure target: 120%
To review, the goal of this model is to stay in tune with the overall risk/reward environment. Therefore, we make adjustments only when there is a meaningful and sustained divergence between the target model reading and our current positions.
TRADING Model: We currently hold trades in the Russell 2000, India Small Caps, Eurozone, a dividend-payer ETF, and the emerging markets.
2018 YTD Performance Update:
DD CORE: +8.4%
DD LEADERS: +7.6%
DD TRADING: +5.9%
S&P 500: +7.4%
|Daily Decision Trading Service
Current Portfolio Summary
|The LEADERS Model|
|% of |
|Technology Select Sector SPDR||XLK||20%||12.1.16||$46.64||Buy|
|Industrial Select Sector SPDR||XLI||20%||8.14.17||$68.58||Buy|
|Health Care Select Sector SPDR||XLV||20%||11.27.17||$81.79||Hold|
|Materials Select Sector SPDR||XLB||20%||1.16.18||$63.02||Buy|
|The CORE EXPOSURE Model|
|% of |
|ProShares UltraPro S&P (3X)||UPRO||39.70%
(Equiv 120% Long)
|The TRADING Model|
|% of |
|iShares Eurozone ETF||EZU||20%||5.11.17||$40.25||Buy|
|First Trust Value Line Dividend Fund||FVD||20%||5.11.17||$28.88||Buy|
|iShares Emerging Markets ETF||EEM||20%||6.112.17||$41.57||Buy|
|VanEck Vectors India Small-Cap Index ETF||SCIF||20%||7.18.17||$58.00||Buy|
|iShares Russell 2000 ETF||IWM||20%||10.19.17||$146.09||Buy|
% of Model Explained
The number shown in this column represents the percentage of the the model this position represents.
Current Rating Explained
This is our rating for the day. The Current Rating tells you what action we would take if we did not currently hold the position. A "Buy" rating means we would be willing to purchase the position at current prices. A "Strong Buy" suggests this would be our first choice to buy. A "Hold" rating indicates we would not make new purchases at current levels. And a "Sell" rating indicates we will likely exit the position in the near-term.
Positions Can Change
Positions often change during the trading session. Remember that we will send a Trade Alert via SMS Text Message and/or Email BEFORE we ever make a move in the models.
About the Daily Decision Models:
The Daily Decision is designed to be a simple, easy-to-follow e-letter service showcasing 3 different model portfolios. The LEADERS model is the flagship, growth oriented strategy that focuses on "where the action is" in terms of market leadership. The CORE model is a longer-term, risk-managed approach to keeping exposure to market risk in line with prevailing conditions. And as the name implies, the TRADING model is intended to be a tactical, opportunistic trading strategy.
Disclosure: At the time of publication, Mr. Moenning held long positions in the following securities mentioned: All. Note that positions may change at any time.
Wishing You All The Best in Your Investing Endeavors!
The Front Range Trading Team
NOT INVESTMENT ADVICE. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Investors should always consult an investment professional before making any investment.