Dividend Stocks Hitting New Highs- Gold Plunges -13%

Dividend Stocks Hitting New Highs- Gold Plunges -13%

Posted on April 22, 2013

4/22/2013 Market State 2 (short term consolidation within a long and intermediate term Bull market) Canterbury Volatility index (CVI) = 64 (up 13 points from the low. CVI has been stable for the last 3 days.) CVI Volatility Indicators = Bullish US stock market is 95% oversold = Low Risk

What is the downside risk while in Market State 2? The typical correction, in Market State 2, is between -3% to -7% from the S&P 500 peak at 1593. Also, a one day isolated 200 to 275 point one day decline, like last Monday, can occur on the Dow at any time for any reason. Such events would be considered to be a normal fluctuation.

The S&P 500 was down -2.11% last week. The market is trading at about the same level as it did six weeks ago. The recent six week consolidation has created an oversold market. When combined with the low volatility indicators, the short term risk should be limited. The Portfolio Thermostat is indicating that the US stock market is likely to trade sideways for the short term.

The Portfolio Thermostat has continued to make the necessary rotation as the new market environment has emerged. The leadership has been shifting to high dividend equities. For example, XLU – Utilities Sector, XLP- Consumer Staples and PFF - US Preferred Stock all hit new highs last Friday. In addition, XLV - Health Care Sector, VNQ – RIETs, IYR - US Real Estate and DVY - Dow Dividend ETFs were basically flat for the week.


The Portfolio Thermostat process identifies, and then categorizes, the various market environments into 12 individual Market States described in Figure 1. Effective risk and portfolio management requires a dynamic process to actively manage a portfolio’s securities to match the current environment. Only then is it possible to maintain low risk and positive returns as the markets shift from one environment to another. The Portfolio Thermostat’s 12 Market States, shown in Figure 1, include 6 Bullish (rational) Market States; 4 Bearish (irrational) Market States and 2 Transitional (yellow) Market States. The Transitional Market States tend to precede a change from Bullish to Bearish, indicating caution. Figure 1: The Market States matrix give an overview of the different characteristics and components that are typical of each of the 12 Market States.

Market State Description Market State Description
MS 1 Bullish
Rational
MS 7 Transitional
Rational
MS 2 Bullish
Rational
MS 8 Bearish
Emotional
MS 3 Bullish
Emotional
MS 9 Transitional
Emotional
MS 4 Transitional
Emotional
MS 10 Bearish
Emotional
MS 5 Bullish
Emotional
MS 11 Bearish
Irrational
MS 6 Bearish
Emotional
MS 12 Bearish
Irrational
       
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.