NASDAQ Showing Strength

NASDAQ Showing Strength

Posted on March 18, 2019
Market State 8 (Transitional) – The S&P 500 continues to be in a Transitional Market Environment.  The current environment has decreasing volatility, coupled with negative short-term supply & demand indicators. Market State 8 is characterized by negative long-term indicators, decreasing volatility, and negative short-term supply & demand indicators.  
Canterbury Volatility Index (CVI 77) – Volatility, as measured by the Canterbury Volatility Index (CVI) fell 3 points last week.  This marks the tenth consecutive week of declining volatility following a period of high CVI.  CVI reached a peak value of 129 back in the first week of January but has now declined to CVI 77.  Canterbury’s short-term CVI, a 10-day volatility reading currently measures CVI 49 but has been as low as CVI 33 during this run of declining volatility.
The S&P 500 rose +2.9% last week following a slight pullback of -2% to begin the month of March.  The NASDAQ was up +3.9% for the week, while the Dow was only up +1.6%.  According to relative strength lines, which compare the strength of one security in relation to a benchmark security, the NASDAQ is now outperforming the S&P 500.  Historically, market conditions are more favorable when the NASDAQ is outperforming the S&P 500, indicating that investors are willing to take on more risk.

Conversely, the Dow Jones Industrial Average has been falling in Relative Strength compared to the S&P 500:

Historically, this is the ideal lineup for the 3 major US indexes.  We want the NASDAQ to be leading the S&P 500, and the S&P 500 to be leading the Dow Jones. We can see that prior to the initial drop in October, the reverse was true.  The NASDAQ 100 was lagging the S&P 500, which was lagging the Dow Jones.  This was leading into the initial volatility spike in October, and continued into the market correction in December.

Bottom Line
The S&P 500 remains in a Transitional Market State.  Many areas are starting to show signs of strength.  Utilities and Staples are both in Bull Markets, several international countries, like Brazil are also showing bullish, risk-adjusted strength.  The NASDAQ is outperforming the S&P 500, and the S&P 500 is outperforming the Dow.

Markets are dynamic and will go through many different environments. Some will be bullish; others bearish; and some in between (transitional).  In order to navigate everchanging market environments, we need an adaptive portfolio process, like the Canterbury Portfolio Thermostat.
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.