9 June 1999
Market Choppiness Reaches 11-Year High
By some new measures currently under development, the stock market's choppiness in May was the highest since the 1987 Crash. New indicators that measure strength of trend and its opposite (choppiness) are being studied with respect to their potential as market diagnostics and predictors of future market performance. The initial results suggest that improvements to the models are possible using the new diagnostics.
The study is continuing...
updated 18 May 99
New Tier of Moderate Investment
Strategies Under Development
A new tier of investment strategies is under development. The methods currently presented on this site are all conservative: in all models the average market exposure is well under 100%, with corresponding low volatility. The new strategies are moderate, with average market exposures of 70-140% or so. Volatility is anticipated to be roughly equivalent to that of the broad market. The goals of minimizing draw-downs and maximizing risk-adjusted return will be fundamental in the new moderate strategies, as they are in the conservative strategies.
View the performance for the first of the new models, the prototype
Model
#17.
15 May 1999
Time to Correct?
A week ago, as the stock market wobbled, and bonds continued their tumble, I began to think the market might be headed into a correction. Already, the darlings of inexperienced traders, the internet stocks, had corrected and their momentum faded. Are people perhaps now using the rises as selling opportunities?
Meanwhile, oil prices have zoomed upward, something immediately noticeable at the local gas pump. But the full impact of this increase won't be felt until all the industries and manufacturers who use oil (as fuel or as a component of their goods) have to increase the prices of their products. Everything from plastics to electricity is affected.
What concerns me more is that the stock market seems to have virtually ignored what's happened to bonds. The 30 year bond yield has risen from 4.7% last summer to 5.9% now, a 25% increase. This will have an eventual effect on corporate loans, consumer mortgages, and other basic financial elements of our economy. A bond market sliding downward over an extended period of time while a bullish stock market roars onward--that's a classic warning of an impending crash. Check the charts for 1987, for example.
But reality doesn't stay hidden forever. Friday's consumer price report
gave everyone pause, confirming what the bond market was already saying:
inflation is expected in the near future. The Federal Reserve can be expected
to act if necessary. That prospect may be quite troubling for stocks next
week. But it will be far better for the stock market to correct now than
for it to continue upward as if there's no such thing as risk.
13 May 99
Series 7 Preparation Is Underway
I am preparing to take the NASD Series 7 Licensing examination for securities
dealers. My text book has arrived, and I expect to be ready for the exam
within a few weeks.
15 May 1999
Time to Correct?
A week ago, as the stock market wobbled, and bonds continued their tumble, I began to think the market might be headed into a correction. Already, the darlings of inexperienced traders, the internet stocks, had corrected and their momentum faded. Are people perhaps now using the rises as selling opportunities?
Meanwhile, oil prices have zoomed upward, something immediately noticeable at the local gas pump. But the full impact of this increase won't be felt until all the industries and manufacturers who use oil (as fuel or as a component of their goods) have to increase the prices of their products. Everything from plastics to electricity is affected.
What concerns me more is that the stock market seems to have virtually ignored what's happened to bonds. The 30 year bond yield has risen from 4.7% last summer to 5.9% now, a 25% increase. This will have an eventual effect on corporate loans, consumer mortgages, and other basic financial elements of our economy. A bond market sliding downward over an extended period of time while a bullish stock market roars onward--that's a classic warning of an impending crash. Check the charts for 1987, for example.
But reality doesn't stay hidden forever. Friday's consumer price report
gave everyone pause, confirming what the bond market was already saying:
inflation is expected in the near future. The Federal Reserve can be expected
to act if necessary. That prospect may be quite troubling for stocks next
week. But it will be far better for the stock market to correct now than
for it to continue upward as if there's no such thing as risk.
2 May 1999
Models Easily Surpass NYSE's Risk-Adjusted Return through April 30:
| Year to Date Gain | % Market Exposure | Maximum Draw Down | Risk-Adjusted Annual Return | |
| Model 9 | 8.08 | 52 | 3.03 | 48.84 |
| Model 4 | 3.24 | 24 | 2.51 | 43.82 |
| Model 3 | 4.12 | 28 | 3.05 | 42.13 |
| Model 7 | 6.89 | 59 | 3.03 | 36.97 |
| Model 0 | 6.05 | 57 | 4.69 | 33.26 |
| Model 5 | 2.26 | 33 | 4.40 | 22.84 |
| NYSE | 6.46 | 100 | 5.64 | 21.26 |
1 May 1999
Yes, it's a bull market. But there's plenty to worry about: seeds are being planted. The war is more than using up the big surplus everyone was wondering what to do about a few months ago. Consumers are spending and spending and spending--enough that for the first time in a long time the markets fell on inflation jitters yesterday. The 18% rout of internet stocks 2 weeks ago was just a hint to all the novice investors who think the market can only go up.
Nonetheless, it is a bull market. Stocks are the best long-term investment historically, and appear to be not overly risky for now.
You are cordially invited to read my new report, Stock Market Modeling Techniques and Potential Applications .
Soon to follow: updated charts on the market versus all the models through
April 30.
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