The US Equity Market Is Gaining Momentum

The US Equity Market Is Gaining Momentum

Posted on June 23, 2014

Canterbury Portfolio Thermostat - Weekly Update – 06/23/14

Market State 1 (11 trading days) - Long term: Bullish; Short term: Bullish.

Canterbury Volatility Index is at CVI = 44: The CVI (volatility) declined 3 points for the week. A CVI below 75 represents a low risk market environment.

Volatility continues to decline and is nearing the lowest levels for the 2000s. Low and declining volatility is Bullish for the US equity markets.

Overbought/Oversold Indicator:
Our overbought/oversold indicator is now only 52% overbought (short term neutral). Last week the S&P 500 went up 1.4%. The fact that the market is only 52% overbought, following a strong week and with most major market indexes registering new highs (Bullish).

Market comment:
The Portfolio Thermostat’s combined market indicators looked Bullish going into the beginning of the previous week. Here is a quote from the Canterbury Weekly Comment on 06/16/14: "The probabilities favor new highs in the major US market indexes. The US equity markets are overdue for a meaningful advance. The only thing missing is a lack of positive momentum.”

The equity markets are now gaining some much needed momentum. The NASDAQ’s relative strength is leading the S&P 500. It is Bullish to see the NASDAQ picking up steam. The stocks only advance decline/decline is now at a new high confirming the S&P 500’s new high.

My friend David Vomund, at Vomund Investment Management, pointed out that stock ownership worldwide as a percentage of total assets is at a 50 year low. David said "People don't trust the market. The outperformance of low-volatility, better-yielding stocks is a sign that investors are most concerned about the downside risk. They want protection and are sacrificing up-side potential in growth and speculative issues to achieve it.” In other words, David is saying that there is plenty of money available to move into equities.

Remember that most Bull markets occur when investors are nervous and the financial news is somewhat pessimistic. The first part of this year has seen a great deal of rotation in leadership and mostly a sideways consolidation of last year’s gains. Most Bull markets do not go straight up. It is normal to see a market advance, followed by a short term correction or a sideways consolidation of gains and then another advance. Put another way, Bull markets tend to establish a high, consolidate, then establish a higher high, then a higher low, higher high and so on and so forth.

Bottom Line:
Market prices are driven by supply and demand. Almost all supply and demand indicators are based on probabilities. As of today, The Portfolio Thermostat’s indicators show that the probabilities are heavily in favor of the next meaningful move, in most global equity markets, to be on the upside.

Our portfolio currently holds 14 Exchange Traded Funds (ETFs). The Portfolio Thermostat’s Security State ratings show that 13 of our ETFs are rated as outright Buys and 1 ETF holding is rated as a Hold.

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.