Internal Contradictions: When to Be Nervous about New Highs

SYNPOSIS
The markets were upbeat last week heading out of the Victoria Day weekend in Canada and heading into the Memorial Weekend in the US. The Nasdaq Composite performed particularly well with a 2.3% gain, and the S&P 500 closed the week at an all-time high above 1900.

ProfiTrend Portfolio… Our annualized growth rate has increased to 65%, which is still well ahead of the comparable stats for the S&P 500 (14%) and the S&P/TSX Composite Index (17%). Our week-over-week performances comes without any trading. New additions from the previous week are starting to have an influence on PTP performance.

Investor Confidence… The latest State Street Investor Confidence data are just out for the current month of May 2014. The “smart money” continues to ignore geopolitical issues… treating them as mostly the media-created fantasies that they are. They recognize that riskier equities are still a better place to be than bonds and other “risk-free” assets. This is actually most pronounced with European investments in equities than with North American or Asian investments in stocks.
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Topic of the Week… Internal Contradictions: When to Be Nervous about New Highs
It can actually be quite boring to report on the markets when the key indexes are hitting new highs, the “smart money” is looking for more gains ahead, and volatility is near the lowest point in the entire history of the VIX. Generally our portfolios are reflecting this bag of riches as well, and we wish that we had more cash to invest. Although this is a happy form of boredom, it can make us complacent and less attuned to other issues that aren’t being reported by the media. I’m going to present you with some thoughts on this as our topic this week. You also need to keep an eye on internal contradictions. I’ll walk you through some of those as applied to our investment climate right now.

Video of the Week… We’ve brought Marc Faber back in another video to discuss his views on both the American and Chinese market. “Dr Doom” doesn’t hold back on his negative sentiment. The problem is that he’s been totally negative through this 5-6 year bull market. Do you believe him this time?

Recessions & Stock Markets… Myths & Realities

SYNOPSIS
The markets were mainly to the downside last week, with Nasdaq being the sole exception among the major indexes that we report on. On a trend basis US stocks are beginning to be favoured again after an extensive period where Canadian stocks outperformed.

ProfiTrend Portfolio… Our annualized growth rate has declined to 58%, which is still well ahead of the comparable stats for the S&P 500 (7%) and the S&P/TSX Composite Index (10%). Our week-over-week decline comes from a fairly active trading week… four positions were sold and five new ones were added. That’s a lot of one-week churn in a portfolio that has averaged 10-15 stocks in recent months. It will take time for the new acquisitions to pump up overall PTP performance.

Investor Confidence… The latest State Street Investor Confidence data are also reported for the month of April 2014. The “smart money” continues to avoid geopolitical issues, as the media-creatived “crises” that many of them are. They recognize that riskier equities are still a better place to be than bonds and other “risk-free” assets.
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Topic of the Week… Recessions & Stock Markets… Myths & Realities
This week we run the risk of offending more advanced investors with a discussion of economic conditions and stock market prices. Those on top of this topic may skip the discussion below; but the truth of the matter is that most people still have the misguided belief that it’s insane to invest in stocks during a recession. Or, that stocks have no where to go but up in positive economic times. Within rounding error, both of these beliefs are 100% wrong! So, why are these notions so widely held? Because the Biz media spread these beliefs extensively, day after day, year after year.

We’ll show you what the real evidence is, and what you should do about it.

A Brief History of Bull & Bear Markets & How to Track Them

SYNOPSIS
The markets were up last week with S&P/TSX Composite Index stocks leading the way.

Trading activity… There was no activity this past week in the ProfiTrend Portfolio (PTP). The annualized growth rate of the PTP is 123%… down slightly from last week. That compares with an AGR of 29% for the S&P/TSX Composite Index and 15% for the S&P 500.

Topic of the Week… A Brief History of Bull & Bear Markets & How to Track Them
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We’re taking on a larger than usual challenge this week. We want you to have a better understanding of bull and bear markets, and we want to provide you with some charting tips for making this sort of data far more informative than conventional price history graphs. The methods we describe can easily be re-applied elsewhere for similar cyclical situations. We walk you through every bull and bear market from 1956 to the present. That’s obviously not all of them, but a half-century of recent history should be enough.

State Street Investor Confidence Index… The latest data for the month of April are included… fresh off of the latest press release last Tuesday. There was a tiny pull back during April, but the SSICI is still favouring riskier assets like stocks, rather than the security of income-based vehicles like bonds. As you may recall the SSICI is based on the actual money flow of institutional investors, not opinion surveys. State Street has $2.3 trillion under management, so this should be a rock solid indicator of where the “smart money” is located.

Seasonality… Now that it’s May and “Sell in May and Go Away” may be on some people’s minds, those who invest in calendar effects should being looking for niche opportunities. We have some of those below. We also have Brooke Thackray’s latest monthly videos on calendar effects for May.