Markets and Portfolios Oscillate

Markets and Portfolios Oscillate

Posted on August 25, 2014

Canterbury Portfolio Thermostat-Weekly Update- 8/25/14

Market State 2 (32 trading days) - Long-term: Bullish; Short-term: Neutral/Bearish

Canterbury Volatility Index is at CVI = 47 (Bullish): The CVI (volatility) remains close to historical low levels. As a result, most equity indexes, styles and portfolios are stable and efficient.

Overbought/Oversold "Oscillator” is now at 99% overbought (short term Bearish). Our overbought oversold indicator ranges from 100% overbought (Bearish) to 100% oversold (Bullish). A reading of 95% overbought or oversold is considered to be an extreme reading.

The Canterbury Overbought/Oversold indicator was developed by David Vomund, a market technician and owner of Vomund Investment Management. Our indicator consists of a proprietary group analytics called "oscillators.” Our Overbought/Oversold oscillator is used as a "leading indicator.”  In other words, it can give an early indication of a change in the short term trend.

What is an Oscillator?

An oscillator basically oscillates, or fluctuates, up and down (generally) around a mean or average. An oscillator can be a reflection of the normal market noise, or the "ebb and flow,” of the markets. Oscillators are helpful for determining extreme high "overbought” and low levels "oversold.” Meaning that prices may have risen too quickly or, on the other hand, prices may have fallen too quickly and are unsustainably low.

Market Comment:

The S&P 500 has returned to its old highs following a 4% decline. This ebb and flow, on low volatility is typical of bull markets. The S&P 500’s price is at a new high but the stocks only advance decline line is below its old high. This creates a divergence, or non-confirmation of the new market high. 

The Technology sector, emerging market countries (mainly Asia Pacific and Latin America), real estate and transportation remain at the top of our daily Security State report.

Bottom Line:

All markets, securities will ebb and flow "oscillate” over time. Random noise during Bull Market States is nothing to worry about. Effective portfolio management is about participating in the larger Bull advances and avoiding the pitfalls connected to bear market environments. 

This year has been mainly about consolidating last year’s stock market gains and about a normal reflex rally in bonds following a bad 2013. Making any major moves in the current trendless market could have future repercussions as the markets change.

Expect a sideways to down period, over the short term as the market consolidates. A major correction is unlikely.

Index Year to Date


                                          Change%DJIA                                                                                                    2.56%                                                         S&P 500                                                                                              7.58%                                                                  NASDAQ Composite                                                                          8.67%Russell 2000                                                                                       -0.20%EAFE (Large Cap Intl)                                                                         1.52%

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

The Dow Jones Industrial Average and the Standard & Poor's 500 Stock Index of blue chip stocks, the Standard & Poor's and the Russell 2000 Index are unmanaged indexes representing various segments by market capitalization of the U.S. equity markets. The Nasdaq Composite is an unmanaged index representing the companies traded on the NASDAQ stock market and the National Market System. 

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.