Watching out for Klingons

Its the beginning of the month – time for the monthly Bear-o-meter reading.

For newer readers, the meter is a compilation of 11 factors that are broadly classified under Trend, Breadth, Breadth-momentum, Sentiment, Seasonality & Value. Its a risk/reward reading for US markets. As you are aware, potential risk, and reward exist in markets at all times. The meter is just a tool to measure that tradeoff, not to make direct trades from.

The meter can move in a range of 0-8, where 0 indicates, all things being equal, potential for risk is outweighing potential for reward as the number gets lower. An 8 suggests the opposite. The higher, the better. My simple illustration below shows 3 zones that help us form a picture of this trade-off. The first zone is highest risk, the middle is neutral (normal conditions), the third zone is above average return potential.

bear market bullish
To read more on the meter including historic levels – use the search tool on this blogsite and type Bear-o-meter.

Bear-o-meter remains neutral

Last month, the meter read “3”, which, as you can see above, is in the neutral zone (pardon the Star Trek reference).

Today, the meter remains the same. Its sitting at “3” right now. This reading, as noted last month is not a “run for the hills” risk level.  But it’s low-neutral reading implies:  There is merit in having at least some caution at this time. In fact, the meter’s reading ties into my most recent blog, where I noted that the technical’s are suggesting there’s room for caution.

Of the 11 factors, most remained the same month over month. On the positive side, breadth has definitely improved. The AD line moved up nicely in December. On the negative side, breadth improved almost too much! The % of stocks over their 50 day moving averages went to 91.6 as of yesterdays close. My system assigns a negative point/ “overbought” reading if that indicator moves above 85. BTW– read my book Smart Money/ Dumb Money to learn how to create and monitor the Bear-o-meter on your own.

At the end of the day, the broad breadth trend (AD line) was cancelled by the exuberant breadth-momentum reading of the indicator shown above. We remain stuck in the neutral zone, hoping that no hostile Klingon’s approach our ship.

ValueTrend performs

We sent out our most recent ValueTrend Update newsletter yesterday. In it, we discussed some of our current market thoughts, along with a couple of sectors we like. We also noted that ValueTrend has achieved respectable performance in both our Equity and Aggressive Platforms. The numbers will be posted to the website by the end of today (Tuesday Jan. 3rd, 2024). But, the key point we noted is this:

ValueTrend Equity Platforms have achieved respectable positive numbers over the past 2 years.  This, when the S&P 500 eked out flat performance – and the TSX 300 lost money!

I’ve noted in past blogs that the current and coming market environment is no longer one for passive investing. The past two years proves this point. Index investors are not doing so well.

Some of you are enrolling into my online course along with reading my books and blogs. These are tools that will help you profit in this new volatility.  Volatility I predicted would happen back in 2021. And I don’t think the volatility is over. Keep reading, keep studying. Stay disciplined and control your emotions. This is an environment where, as I have noted before, can be very profitable for those of us who trade using a systematic approach. Not so much for the buy n’ hold crowd, or for the emotional investor.

And if you decide you’d like to have a conversation with Craig & I regarding ValueTrend managing your money as prudently and effectively as we do for our existing clients, we invite you to contact us here. We serve investors across Canada with combined household assets of $500k +.



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