Here is a run through of this weeks observations. While I analyze the markets using measures of absolute momentum, I include performance charts here for a quick and dirty illustration of performance. Where I wish to specifically show momentum, I use MACD charts.
My basic model: One of my models is a simple allocation program between the total stock market, VTI, and long term government bonds, TLT. These two ETFs are a great pair to follow since they have almost the same average volatility. Thus, they can be compared based on pure relative strength with about equal expectations for each holdings appreciation or depreciation capability. I've decided to share my weekly numbers for this program since it is so simple:
The current allocation for this program is Balanced (about 1:1 stocks:bonds).
In the currency markets, the US dollar continues with its positive momentum. My programs have dropped the Yuan for now, until it regains strength again.
Utilities a big winner in 2014: One of my top holdings for 2014 was the utilities sector (xlu). My models continue to privilege that sector into 2015 until things change. The retail sector (xrt) is also doing well this last quarter.
Healthcare hit hard, Energy still a bad option: This week, there was heavy selling in the high-flying healthcare sector. It could just be a blip on the continued advance, but keep an eye on this weakness.
Energy continues to be the disfavored sector and models are saying steer clear until things change otherwise:
China and Small Caps may be fresh winners going into 2015: For now, my models are increasing exposure to these two areas due to their recent strength.
The POS is currently at an 8/8, so it looks like we got another Santa Claus rally. I am looking forward to what the start of 2015 will bring!
See you next week!
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