The Summer Stock Market Doldrums

The Summer Stock Market Doldrums

Posted on August 12, 2013

Canterbury Portfolio Thermostat Weekly Update – 8/12/2013

Market State 1 (last 25 trading days) = Bullish/Rational - Market State 1 is the most predictable of the Portfolio Thermostat’s 12 Market States (environments). The risk, while in MS 1, is typically around -2% to -4% from the most recent market peak.

Canterbury Volatility Index (CVI) = 55:
The CVI was down 5 points for the week and down 18 points from the previous peak (73) on June 26th. Current market risk is low. Note that the DJIA can be subject to a 200 to 275 point isolated one-day decline, particularly when complacency is high and volatility is low. However, such a move, if it occurs, would not affect the current Bullish market environment.

Market Update:
CNBC certainly deserves a lot of credit for effort. They can make a one-car funeral procession sound exciting! "The S&P 500 fell four out of five days for the first time in a long time!” Actually, the S&P 500 has continued to trade sideways and closed the week within 1 point of where it was 15 trading days ago on July 19th.

The US stock market continues to digest its 8% plus gain, which it made in about a six week period. The European markets are improving but have lagged behind the US market for most of the year. The emerging markets, precious metals, bonds, and most commodities, with the exception of US oil and lumber, remain in a long-term Bear Market.

Bottom line:
The summer doldrums have set in for stocks and most other markets. Our US stock market overbought/oversold indicator remained the same for the week at 68% overbought (neutral). Our Canterbury Volatility Index rarely gets as low as it is now (CVI 55). As a point of reference, a CVI below 75 represents a very low risk environment. Boring is good. Low volatility is characteristic of a Bull market. The probabilities continue to favor a sideways market or a short-term correction in the 2% or 4% range from the August 2nd peak at 1709.67.

The Canterbury Portfolio Thermostat Model:
The purpose of the Portfolio Thermostat model is to help maintain acceptable portfolio fluctuations and to avoid "substantial declines.” Substantial declines destroy the likelihood of generating compounded returns, which is the primary objective of all rational investors. The Portfolio Thermostat categorizes the various market environments into 12 individual Market States. Market States 1 through 6 represent different market environments during a long-term Bull market. Market States 7 through 12 are different stages of a long-term Bear market. The model is based on scientific rules composed of several software algorithms. The process adjusts a portfolio’s asset allocation and security holdings to match and potentially profit from virtually any market environment – Bull or Bear.

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.