Weekly Signal: Neutral
Sneak Peek: The Daily Decision Service
On occasion, TSP allows all visitors to "sneak a peek" inside one of our portfolios. This is not a promotional piece on the service, but rather a live look into the service's latest report to subscribers. Below is this week's report on the weekly timing signal reading.
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TSP Daily Decision Service Members:
Stocks finished lower last week (S&P -0.81%, Dow -0.79%, NASDAQ -1.2%, Russell 2000 -1.4%) as heightened Greek debt worries, another leg down in the euro/rise in the dollar, and regulatory concerns in the financials created some uncertainty in the market. In short, the concerns regarding the problems in PIGI’S and the economic outlook in places like China basically offset some good (but not great) macro data in Europe and U.S.
From a short-term perspective, that market continues to be driven by the Dollar/Euro/Stocks/Commodities “trade” being implemented by the fast money and their computers. It would appear that the Euro is the dog wagging the tail right now as any downside movement in the Euro creates a corresponding rise in the dollar and also a tick-for-tick loss in stocks (and vice versa – if the Euro rallies, the dollar declines and both stocks and commodities rise).
How long this “trade” will continue to drive the action is really anybody’s guess. But it is important to note that the current environment can be described as a choppy/trendless consolidation period. As such, it is generally best to wait for the market to “decide” which way it wants to go next via a breakout of the current range (S&P 1335 – 1365).
In these types of markets traders have two choices: (1) Wait for the next trend to develop or (2) Mount up and ride the range – meaning you buy the bottom of the range (with a tight stop, of course) and sell the top of the range.
But for our Daily Decision Service, the game plan hasn’t changed – we follow our disciplined system, which is designed to keep us on the right side of the important trends and to keep us from getting “chopped up” during trendless environments. So, let’s get to the current model readings and our plan for the week.
The Weekly Timing Model: Our weekly model attempts to “call” the direction of the action for the coming week via the historical readings of 10 models-of-models and more than 50 indicators. This week, the model lost some ground as only 2 of our 10 sub-models are positive (our longer-term trend models), 2 sub-models are negative (sentiment and economic) and the rest are neutral. Thus the model signal for the week is Neutral . In short, the current model reading tells us to hold current positions and lean toward the sidelines when in doubt during the coming week.
The fact that our weekly timing model hasn’t had a positive reading now for six weeks also tells us that the internals of the primary trend appear to be weakening. Please don’t misunderstand our point. This does NOT mean that the bull market is over or that a decline is imminent! No, we interpret the weak model readings to be a sign that risk is on the rise.
Remember, our cyclical work is calling for a bear market to begin later in the year (September/October). Therefore, we are not overly concerned that our models tell us to maintain a more cautious approach at the current time. Typically, the stock market will enjoy a "blow off" phase before a bear market begins. So, while stocks can easily head higher, this is not a low-risk environment.
On a personal note, I am currently employing a combination of the Hybrid and Aggressive models in my accounts this year (in addition to the FlexPro and Insiders approaches). Since the market has been quite choppy and our Weekly Model readings haven’t been robust, the Hybrid and Main models have been pushed to cash a fair amount this year. But since the overall trend of the market is still decent, I want to use the Aggressive model due to the fact that the model doesn’t have a “neutral” or cash reading – it is either long or short at all time.
Experience has taught me that there are times when using the Hybrid or Main model is preferred due to the ability to go to cash and there are times when the Aggressive approach is favored. Therefore, I’m using a combination for my accounts at this time.
Finally, as we said last week, with the weekly model in the neutral zone, we will look to the readings from our Daily Model (which is dominated by trend and momentum indicators and designed to keep us in tune with what IS happening in the market) to guide us if there are any changes in the market’s overall trend.
As always, we will send a Trade Alert via email before we make a move.
Enjoy the rest of your weekend.
Dave Moenning
Founder TopStockPortfolios.com
Daily Decision Weekly Model Reading
The Daily Decision Service employs two different "Timing Models" in order to help us make the decision of where (and how much) to be invested: The Weekly Timing Signal and our Daily Timing Model Indicators. We start each week with a "guide" from our weekly model. From there, we let our Daily Models help us make decisions.
Below is the Weekly Timing Signal reading for the week:
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Current Positions:
Below is a summary of the current holdings in each of our three Daily Decision Models:
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About The Daily Decision Models
The Daily Decision Service provides members with three model portfolio alternatives to follow. Below is a summary comparing and contrasting the three models.
- Main Model: The Main Model in our Daily Decision Service is designed to be a "new age" market timing portfolio. The model portfolio has the ability to be long the market, short the market, or in a neutral - or cash - position. The Main Model utilizes the S&P 500 index for both long and short positions and a money market equivalent for the neutral position.
- Aggressive Model: By definition, the Aggressive model takes more risk. This is accomplished in two ways. First, instead of using the S&P 500 index, the model portfolio uses leveraged ETF's which are designed to double or triple the performance of the underlying index on a daily basis. And unlike the Main Model, the Aggressive Model is not limited to the S&
