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  • Is this a buying opportunity?

    Alexander Gloy

    The earthquake and nuclear situation in Japan has triggered a sell-off in the equity markets. Is this a buying opportunity? I say “no”. Two reasons: 1. The Japanese situation is likely to trigger many “unintended” consequences we cannot anticipate right now (for example a strong Yen will hurt profits of Japanese exporters, hence depress their…

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  • LIMTI – update 12/15

    Alexander Gloy

    The LIMTI (Lighthouse Investment Management Timing Index) is an experimental project. It is calculated daily on the basis of various statistical readings on the US stock market (mostly S&P 500 Index) to gauge whether the market is overbought (red shaded area) or oversold (green area). Below I will go into detail in regards to which…

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  • LIMTI – update

    Alexander Gloy

    Update on the Lighthouse Investment Management Timing Index (“LIMTI”): LIMTI (Lighthouse Investment Management Timing Index) as of 11/19/2010 The LIMTI is an experimental project. The index is calculated daily on the basis of various statistical readings on the US stock market (mostly S&P 500 Index) to gauge whether the market is overbought (red shaded area)…

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  • Portfolio managers asleep at the wheel – again?

    Alexander Gloy

    What would you do if you expected a stock market decline, but had to be invested in stocks no matter what (i.e. if you are a fund manager of a mutual fund – you can’t have more than 5% in cash)? You would shift your portfolio out of cyclical (sensitive to economic cycles, i.e. makers…

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  • Presenting the LIMTI

    Alexander Gloy

    Presenting the LIMTI  (Lighthouse Investment Management Timing Index) Apart from fundamental considerations markets move in waves (prevailing bearishness or bullishness). As supply is often constrained (number of shares, bonds, currencies, gold etc) the change in investor sentiment has to happen via the price. Traditional sentiment polls might be misleading, as many portfolio managers are constrained…

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  • Pre-Labor Day stock market bounce not convincing

    Alexander Gloy

    Last week’s 6% bounce in the S&P 500 index was not convincing. There was no volume increase associated with the price increase (usually needed to confirm the uptrend). Source: StockCharts.com Many pundits were claiming the market “had” to go up since too many investors were bearish (pessimistic). But as John Hussmann (of Hussmann Funds) pointed…

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  • Who is right – the bond or the stock market?

    Alexander Gloy

    Since six months the correlation between 10yr Treasury bond yields (purple, left hand scale) and the US stock market (right hand scale) had been perfectly positive. Fears about European defaults and thereby lower world growth led to falling stock prices, which led to rising bond prices (or falling yields). Less growth = less inflation = good…

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  • Number of stocks above a moving average

    Alexander Gloy

    Stocks go up and down. If you calculate a moving average (say, last 50 or 200 days), the stock will sometimes be above, sometimes below that average. One thing is sure: the stock will meander around its average, and it will always come back to its average. If it moves far away from the average…

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  • Equity options put-call ratio

    Alexander Gloy

    Looking at the volume of all equity options traded you can calculate the ratio of put options to call options. Call buyers expect strongly rising prices (let’s call it “+2” on a bullish-ness scale) while call sellers expect falling, flat or slightly rising prices (-0.5). Combined, their expectations can be summed up as +0.75. Put…

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  • New Highs vs New Lows ratio: better indicator

    Alexander Gloy

    A better indicator to sniff out trend changes is the ratio between new highs and new lows. The ratio bottoms when the market bottoms (late November, beginning February) and crests when the market does (mid-January, now?).

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