A Look at the Russell 3000

A Look at the Russell 3000

Posted on November 16, 2015

Weekly Update


Market State 8A – (2 days) Transitional/Bear Market State. The Portfolio Thermostat has been in a Transitional/Bearish Market State for the last 59 trading days, beginning on August 20th when the Portfolio Thermostat shifted out of a Bullish Market State 2.

The Market States “A” Series (7A, 8A, 9A, 10A, 11A, and 12A) denote Transitional/Bearish Market environments, which follow a Bullish Market State. Confirmed Bearish Market States follow the A Series.

Canterbury Volatility Index (CVI 84) – Bullish: Volatility remained unchanged for the week. A volatility between CVI 75 and CVI 90 is considered to be a Neutral reading when combined with the current declining trend, as the volatility has been falling since the September 8th peak of CVI 115.

The Overbought/Oversold indicator is currently 97% Oversold - Short-term Bullish. An overbought (bearish) or oversold (bullish) reading of 95% or higher is considered to be an extreme level. However, this is a very short term indicator. It will not take much of a bounce in the market to move it back to a Neutral reading.


Market Comment:

The equity markets were overdue for a sell-off and it happened last week.


Week of 11/9/15:

S&P 500                                   -3.6%
Dow Jones Industrial Ave.       -3.7%
Russell 2000 (small cap.)         -3.6%
Canterbury (model portfolio)   -0.20%

Source: Bloomberg/Orion


Let’s take a look under the hood of the Russell 3000 to get a big picture view of the status of the U.S. equity markets. The Russell 3000 is a capitalization-weighted index, which means that the larger the company is, the larger its weighting in the index. The Russell 3000 consists of 3,013 stocks and represents 98% of the total U.S. equity market.*


Last Friday, the Russell 3000 closed down from its all-time high on June 22nd. Interestingly enough, it is actually due to only a few large companies that the index is not looking worse than this. Currently, a whopping 52.7% of the 3,013 stocks in the index are down 20% or more from their highs.*

*Source: Carter Worth


The breadth of the market remains weak. Just a few large cap stocks are carrying the load. Here are the leaders:


Year-to-date Top 3 Performers
Netflix      131%
Amazon    117%
Starbucks  51%
Source: Carter Worth


Bottom Line:

The Portfolio Thermostat model will typically see more transactions during a “transitional” market environment, as it adjusts to maintain stability. Remember that the Canterbury portfolio has its own "Market State.” The Portfolio Thermostat model is designed to adjust the holdings to maintain the “portfolio” in one of the 5 Bullish Market States, regardless of the overall status of the financial markets - bull or bear. The Canterbury Model portfolio is currently in Market State 2.


Successful management of a Transitional/Bearish Market State requires an objective and systematic process. The current market environment is unstable and will probably remain so for some time to come.


Please reread the updates from the past few weeks for the importance of managing short term transitional market environments.

Canterbury Investment Management: Tom Hardin

More About Tom Hardin

As Chief Investment Officer, Tom has more than 30 years of experience in the investment management industry and has a broad breadth of knowledge. He is known as an innovator, educator and has been revolutionary in the advancements of portfolio and risk management.

Every effort was used to provide accurate data and mathematical calculations to provide, what we believe to be, accurate results. Canterbury Investment Management, LLC, and its principal owners, make no guarantee of completeness or accuracy of data or calculations as well as conclusions of any statistical data or information contained in the simulation illustrated on this page. Past results or performance is in no way a guarantee of future results.