Boring Periods are a Characteristic of a Long Term Bull Market

Boring Periods are a Characteristic of a Long Term Bull Market

Posted on January 13, 2014

Canterbury Portfolio Thermostat Weekly Update – 1/13/2014

Market State 1 (14 trading days) – long-term Bullish; short-term Bullish - Market State 1 is the most predictable of the Portfolio Thermostat’s 12 Market States (environments). The expected risk is typically in the -2% to -4% ranges, measured from the previous market peak. The most recent S&P 500 peak was registered on 12/31/2013 at 1848.36.

Canterbury Volatility Index (CVI) = 46 (rational market environment) The CVI was down 3 points for the week and continues to see new lows in volatility not seen in almost seven years. As a point of reference, a CVI below 75 is considered to be a safe zone.

Our short term overbought/oversold indicator is a little lower from the previous week and stands at 85% overbought. The market has been slowly working off its overbought position by trading sideways.

Market comment:
The strong fourth quarter in the stock market has been followed by a longer and shallower period of consolidation than normal. The S&P 500 is trading at the same place it was on December 26th. This is why the market’s volatility continues to decline. Risk remains low in the major stock market indexes. The probability for a one or two day market move in the 1% to 2% range is likely in the current environment. Such events typically occur when complacency is high.

Mid cap stocks and the Europe large cap index have gotten stronger. The Industrial, Technology, and Healthcare sectors continue to be the strongest. The Basic Materials sector has recently improved. The more defensive sectors like Utilities and Consumer Staples remain at the bottom of the list. The underperformance of the defensive sectors is typical of a long term Bull market.

Most of the money has been going into the stock market fueling it higher. As a result, the Alternative ETFs have not had broad participation in the advance. In fact, many Alternatives are coming off a flat or down year. In addition to the securities held in our portfolios, High Yield Corporate bonds and Copper both look good.

Bottom Line:
Expect more of the same until the current overbought condition lowers to more of a neutral reading. Boring sideways markets are characteristic of a long term Bullish environment. It won’t change until it changes. It can’t stay in the same trading range forever.

Canterbury Investment Management: Tom Hardin

More About Tom Hardin

As Chief Investment Officer, Tom Hardin, Chartered Market Technician (CMT), makes all the final decisions on all investment and portfolio management decisions for Canterbury Investment Management. Tom has more than 30 years experience in the investment management industry and has broad breadth of knowledge. He is known as an innovator, educator and been revolutionary in the advancements in 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.