The Trading Range Keeps Getting Tighter

The Trading Range Keeps Getting Tighter

Posted on July 20, 2015

Canterbury Weekly Update


Market State 1 (2 Days): Long term: Bullish – Short Term: Bullish/Neutral. The first few days of MS 1 can be somewhat uneventful. The S&P 500 moved up almost 4% over the last seven days, and it would be normal to see a period of consolidation here.

Canterbury Volatility Index (CVI): CVI 58 – The CVI volatility remains unchanged from the prior week. This is the first time in four weeks that we have not seen a week-over-week increase in the CVI volatility. Let’s hope this trend continues.

The Overbought/Oversold indicator is at 92% Overbought (short term bearish). For reference, 95% Oversold or higher would be considered an extreme level.

Market Comment:

We remain in a tight trading range market environment and continue to see rotations in leadership. Although both the S&P 500 and the NASDAQ have regained the slight declines they experienced from the Greek situation, the NASDAQ has been slightly underperforming up until last week. It is now picking up steam, though, as Google turned in a big day (+16%) on Thursday. Better to have technology leading the pack than defensive stocks!

The S&P 500, on the other hand, is backed up against short-term resistance in the 2140 range. A short-term breakout of the trading range is unlikely, and we should expect to see more of the same old boring environment.

My friend David Vomund, at Vomund Investment Management, reminded me recently that it has been one year since Janet Yellen’s bearish call on Biotech industry. To the contrary, over the last 12 months, it has in fact been up over 50%. The Healthcare sector (XLV), Pharmaceuticals (IHE), and Medical Devices (IHI) have all been very strong performers.

Bottom Line:

Although Janet Yellen is highly accomplished, she should stick to what she knows best. There is no room for subjectivity in security selection. There are a lot of opinions on what will happen in the future and they are just that, opinions. Evidence-based ETF research is the result of the development of testable applications and refinement from extensive statistically relevant testing.

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.