The Daily Decision for 6.11.18 - Buckle Up, This Will Be Interesting

The State of the Markets:

Good Monday morning and welcome back to the land of blinking screens. I hope you are buckled in as we've got a big week for the markets coming. So, before we review the state of the market models, let's take a look at what might shape the markets this week.

The news flow actually started to flow before the week began here in the U.S. We started with the reaction to the G-7 meeting, where there was some drama over U.S. tariffs. Next, Italy's new Finance Minister, Giovanni Tira, said nice things about the euro and that his government would block any conditions that would "push toward an exit." This pushed Italian stocks up 2% and helped European equities perk up.

Next up is the historic summit between President Trump and North Korean leader Kim Jong Un. Both have arrived in Singapore and senior officials are busy trying to iron out differences before the actual summit takes place. At stake here is security environment in Asia but there continues to be concerns about what the term "denuclearization" means to both sides.

Then the fun with the Central Bankers begins. First up is the U.S. Federal Reserve. Jay Powell's gang begins its two-day meeting on Tuesday. Just about everyone on the planet expects a 0.25% rate hike on Wednesday and another at the September meeting. However, the real question is about what happens after September. As such, market players will be listening for clues about the possibility of a fourth rate increase in 2018 and what Powell & Co. have planned for next year.

On Thursday, it's Super Mario's turn in the spotlight. No one expects the ECB to make any changes to its monthly QE program, where the bank currently purchases 30 billion euros of bonds. However, analysts will be listening intently to any discussion relating to when/how Draghi plans for ending its QE campaign.

On Friday, the central bank parade comes to a close with the Bank of Japan's meeting. There are no changes expected from the BOJ's "QE Infinity" approach, so this will likely be the least interesting meeting.

In between all the central bank meetings, investors will also get data on retail sales, inflation, and industrial production in the U.S., as well as some important manufacturing numbers out of China.

Oh and lest we forget, the U.S. is also engaged in trade negotiations on different fronts. So, like I said at the outset, it is probably a good idea to have your seatbelt fastened this week as there are any number of items that could cause the ride to become a bit bumpy.

Now move on to the indicators...

The State of the Big-Picture Market Models

I like to start each week with a review of the state of my favorite big-picture market models, which are designed to help me determine which team is in control of the prevailing major trend.

View My Favorite Market Models Online

The Bottom Line:

  • The average return of the Primary Cycle board's components appears to tell the whole story here. In short, while there are risk factors such as monetary conditions and valuation that are elevated, the trend and internal health of the market remains sound. As such, the bulls deserve the benefit of any doubt.

The State of the Trend

Once I've reviewed the big picture, I then turn to the "state of the trend." These indicators are designed to give us a feel for the overall health of the current short- and intermediate-term trend models.

View Trend Indicator Board Online

The Bottom Line:

  • Last week, I opined that the trend of the S&P 500 was not actually as strong as the trend board might suggest. This week, I will retract that statement as the venerable index broke out of resistance and is in an uptrend. Advantage Bulls.

The State of Internal Momentum

Next up are the momentum indicators, which are designed to tell us whether there is any "oomph" behind the current trend.

View Momentum Indicator Board Online

The Bottom Line:

  • The market's internal momentum remains in good shape. 'Nuff said. Advantage Bulls.

The State of the "Trade"

We also focus each week on the "early warning" board, which is designed to indicate when traders might start to "go the other way" -- for a trade.

View Early Warning Indicator Board Online

The Bottom Line:

  • This week's "Early Warning" board doesn't clearly favor the bears yet (from a short-term perspective), but it does appear to be moving in that direction. Thus, we will give the bears a slight near-term advantage.

The State of the Macro Picture

Now let's move on to the market's "external factors" - the indicators designed to tell us the state of the big-picture market drivers including monetary conditions, the economy, inflation, and valuations.

View External Factors Indicator Board Online

The Bottom Line:

  • We have made some additional changes to the External Factors board. First, we have added an earnings component. Next, we have consolidated the Monetary and Valuation models into a composite. We believe the changes makes the board more useful and the addition of an earnings components helps partially offset the monetary and valuation conditions and brings the overall board more toward neutral.

HCR Awarded Top Honors in 2018 NAAIM Shark Tank Portfolio Strategy Competition

Each year, NAAIM (National Association of Active Investment Managers) hosts a competition to identify the best actively managed investment strategies. In April, HCR's Dave Moenning took home first place for his flagship risk management strategy.

Press Release

Want to Learn More? Contact Dave

A Word About Managing Risk in the Stock Market

Thought For The Day:

To understand one thing well is better than understanding many things by halves. — Johann Wolfgang Von Goethe

Wishing you green screens and all the best for a great day,

David D. Moenning
Founder, Chief Investment Officer
Heritage Capital Research

HCR Focuses on a Risk-Managed Approach to Investing
Must Read: What Risk Management Can and Cannot Do

HCR's Financial Advisor Services

HCR's Individual Investor Services

Questions, comments, or ideas? Contact Us

At the time of publication, Mr. Moenning held long positions in the following securities mentioned: none - Note that positions may change at any time.

We are excited to announce that an important upgrade to our service will be implemented within the next month.

First, the CORE risk-managed strategy will take a more growth-oriented approach. Next, the TRADING strategy will focus on 10 individual "top gun" stock positions. Most importantly, all three of our strategies will be run in a single model - what is now the LEADERS model. The goal is to make the service simpler to follow by putting everything in one place.

We will be looking for an opportunity to make the change and implement the upgrade. So, be sure to stay tuned.

Today's Model Review:

LEADERS Model: The LEADERS currently holds 20% positions in the Consumer Discretionary, Technology, Health Care, Financials, and Energy sectors.

CORE Model (Risk Managed Exposure):

Today's CORE model's exposure target: 70%

Current CORE Model exposure: 75%

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 gold, commodities, global technology, and the internet sector.

2018 YTD Performance Update:
S&P 500: +3.9%

Daily Decision Trading Service
Current Portfolio Summary

% of
Technology Select Sector SPDR Buy 20% 12.1.16 $46.64 Buy
Health Care Select Sector SPDR XLV 20% 11.27.17 $81.79 Buy
Consumer Discretionary Select Sector SPDR XLY 20% 2.9.18 $99.67 Hold
Financials Select Sector SPDR XLF 20% 2.12.18 $27.94 Buy
Energy Select Sector SPDR XLE 20% 5.2.18 $73.57 Buy

% of
SPDR S&P 500 ETF SPY 37.5% 4.17.18 $269.78 Buy
iShares S&P Small-Cap IJR 37.5% 4.17.18 $79.83 Buy
Cash NA 25.0% NA $1.00 Hold

% of
PowerShares Commodity Index ETF DBC 25% 5.2.18 $17.43 Buy
First Trust Internet Index FDN 25% 2.26.18 $124.00 Buy
iShares Global Technology IXN 25% 2.26.18 $165.40 Buy
SPDR Gold Shares GLD 25% 4.17.18 $127.27 Strong 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: SPY, IJR XLK, XLV, XLY, XLF, DBC, FDN, IXN, GLD Note that positions may change at any time.

Wishing You All The Best in Your Investing Endeavors!

The Front Range Trading Team

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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.

Posted to Daily Decisions Service on Jun 11, 2018 — 9:06 AM
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