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). This week saw a shift towards bonds.
The Dollar is King- The US dollar continues its streak upwards into 2015. UUP is en ETF that represents the value of the US dollar versus other major currencies, especially the Euro and Yen. The chart below shows how other currencies' pain is the dollar's gain:
Overall- This week saw a step away from US stocks and into Treasuries, the Chinese stock market, and the Dollar.
The POS is on an 8, but any substantial weakness this week will turn it negative. The markets have stagnated to a decision point. We should know the next major direction by the end of the week.
See you next week!
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