Seeking Alpha

Jeff Diercks'  Instablog

Jeff Diercks
Send Message
Jeff Diercks, is an investapreneur and recovering CPA. He actively trades his own money and manages the assets of a select group of clients at InTrust Advisors, a Tampa, Florida based wealth management firm focused on trend following and price momentum strategies utilizing ETF securities. Mr.... More
My company:
InTrust Advisors
My blog:
InTrust Advisors
My book:
View Jeff Diercks' Instablogs on:
  • When Do Markets Trend?

    One of the more obvious statements that an investor can make (especially a trend follower) is that he/she needs a trend to profit from the markets. Everyone needs a trend to make money in the markets!

    However the average investor generally only makes money on the bullish trends of the market. The trend follower, on the other hand, makes money on both bullish and bearish trending markets.

    Unfortunately, markets do not always trend and, as a result, the trend follower struggles in certain markets. The Achilles heal of the trend follower is a "trendless" or "directionless" market, which Jon Sundt., President of Altegris Investments, describes as the markets of 2009, 2011 and 2012.

    In his recent article entitled "Are Trends Trending?", he states that "those years have the distinction of posting three of the four lowest trend-strength readings for a calendar year in history." His observation is from the review of an interesting trend measurement developed by Rho Asset Management in Zug, Switzerland.

    Rho Asset Management developed a simple trend barometer called the Rho Trend Barometer. This barometer generally signals a trending environment for managed futures, which are traditionally traded using trend following. Yes, I realize we use ETFs and mutual funds, the trend following side of this concept is the same. When the barometer reads 43.3% or greater, the trend is up. When it is below 43.3%, the trend is neutral and directionless.

    According to Jon Sundt's article, "four of the five calendar years that the Rho Trend Barometer registered a value of less than 43.3% turned out to be losing years for managed futures. In 2009, for instance, the Trend barometer dipped to 34.7%, a year when managed futures returned a negative 7.98%. By contrast, in 2008 the Rho Trend Barometer registered a 52.1% and managed futures returned an average of 15.47%."

    So with this information in our back pocket, where is this barometer today? The answer - 30%, or trending neutral. Since the end of December, the barometer has dropped from 60% (bullish strong trend) to 30% today (a neutral trend).

    1-13-2014 10-53-16 AM

    Historically, trendless or neutral markets have been short-lived. In fact, Jon Sundt stated "if the era of low interests rates, diminished or compressed volatility and risk-on / risk off investing is over, managed futures (and trend followers in general) could benefit." He goes on to say "if the Federal Reserve does taper quantitative easing…..a sustained period of more conservative, risk-off investing could ensue."

    Finally, he states what we have believed for more than a year now "We think there is a good possibility that trends will strengthen in the months ahead." Translation, it could be a good time to have trend following in your portfolio or as part of your overall investment approach.

    Isn't it time you get a free trial of Historically, we have beaten most index averages in back-tested performance. If trends start to once again move in sustained movements, either up or down, this could be an excellent time to be a subscriber!

    Jan 13 2:27 PM | Link | Comment!
  • Performance For The Year And Month Ended December 2013

    Happy New Year! What can we say? What a year 2013 was!

    Of course, that is how bubbles work and this my friends is a bubble. Maybe even the bubble to end all bubbles!

    Now does this market move higher? So far, I see no reason it does not at least through May and probably overall for 2014.

    However, all bubble eventually pop and this one will be no different. This bubble may go much farther and longer than anyone (including yours truly) might imagine, but eventually when hardly no bears are left, it will pop and it will be a blood bath.

    So enjoy the bubble! It's hard not to like positive returns (even as our models continue to get punk'd by the Central Bankers of the world on occasion).

    You can see that despite a tough start, December was another positive month for market returns:

    (click to enlarge)

    The Q4 and 2013 annual returns are even more impressive:

    The most impressive performance number to me is the little number the Central Bankers did on the gold bugs. What a hit?

    Thankfully, our signals had us short (or inverse) gold all year! Performance

    Our models and trade signals kept us on the right side of the market in December as you can see below.

    (click to enlarge)

    (click to enlarge)

    The lone exception was, of course, our EAFE index trade signals for December which weighted on monthly performance.

    It's funny that these signals actually had us outperforming on a relative basis early in the month, but the Federal Reserve's surprise taper announcement, positive seasonality later in the month and further ECB liquidity provision, quickly reversed weak foreign markets and of course "saved the day." It seems that even a normal healthy correction is now a thing of the past!

    Also of note the high yield index has been struggling of late. This index many times is the preverbal "Canary in the coal mine" for short-term market tops so keep an eye on this index. We are well overdue for some kind of corrective action on this recent run up.

    Market Forecast - 2014

    So what happens next? As I alluded to above, this bubble could very well continue. There is still a lot of retail money on the sidelines and the guys on Wall Street will not rest until those investors are sucked in and then allowed to paint the top of the market.

    Obviously, the U.S. Federal Reserve is continuing its Quantitative Easing (QE) program at a reduced rate, but $75 billion a month is still a lot of liquidity. It has to go somewhere and the markets have been the beneficiaries. I see no change here.

    We are in month 58 of this bull market cycle. The mean bull cycle is 50 months. The average is 67 months. (See our past post- This Bull is Now 55 Months Old!)

    However, these numbers are really meaningless until the Fed stops priming the pump with liquidity or some kind of dollar crisis happens that causes investors to turn and run. My best guess is that we follow historical mid-term trends as outlined by Stock Traders Almanac and have a positive year in 2014 with a summer dip. I believe the actual bear market will be pushed off into 2015 (or later).

    I will say this, the longer the next recession and bear market are forestalled, the more significant they will likely be!

    As a trend follower, this just makes my juices flow. That blood bath will be an amazing market for us, assuming the bloodbath happens over time and not in just a few days.

    Don't you miss the party! Why not get a free 30 day trial and be in position to win no matter which direction the market moves?

    Jan 02 1:26 PM | Link | Comment!
  • The Best Of II....The Sequel

    If Hollywood can have sequels, why can't I? We have a lot of good posts that many of you have probably never seen. It is the season of giving after all!

    So here is a gift for you:

    How to Determine The Trend in a Stock or Index - Here is a simple video on how to determine the trend on any stock or index.

    Learning to Sit On Your Hands - This post is for those with that terrible feeling in the pit of their stomachs that they should do the market moves against their trend following position(s). So while you are still waiting for your signal or the resumption of the trend, here are some points to ponder.

    Trend Following is Still and Art, Not a Science - Trend following (and investing) is as much an art as it is science. In this post we cover a few of the common situations where wonder (the intersection of art and science) come into play in your decision making and provide some guidance to help with the art side of trend following signals.

    Why Trend Following Beats Long / Short Hedge Funds - In this post, we explore the primary reason trend followers are the way to go when compared to equity long/short hedge fund managers.

    Commodities, the Great Diversifier! - Are commodities are good idea in your portfolio? Find out how they affect performance, portfolio volatility and how best to trade them!

    Two Ways Managers Ride the Trend - Today we are going to give you some the secret sauce! Did you know that there are two basic types of trend followers? Find out how they differ!

    Trend Following: Is It Cheap Insurance? - Is it possible that adding trend following to your portfolio could be the cheapest insurance you can buy against the next bear market? Find out why time may be running out to buy this cheap insurance before the bear grips your portfolio.

    How to Manage Your Portfolio Like a Hedge Fund Manager - Did you every wonder what makes hedge fund managers so special? In this post, we will give you the scoop on what they do that is so special and how you can use Stock-Signal to duplicate their results without any using any leverage.

    If You Don't Take The Signal, You Will Hate Yourself Later! - Isn't it funny that one of the greatest home run hitters of all time (Babe Ruth) is only remembered for the times he stroked that ball over the left or right field wall, not the times he flied, grounded or struck out? Find out why investing and more specifically trend following is like baseball.

    Ten Commandments Worth Following For Big Gains - In this post, we take a look at Andrew Abraham's 10 Commandments of trend following from his upcoming book The Bible of Trend Following.

    Enjoy your gift and have a happy holidays!

    By the way, it's not too late to get for your friend, family member or neighbor. At just $9.95 per month, our buy and sell signals are extremely affordable!

    Dec 23 2:33 PM | Link | Comment!
Full index of posts »
Latest Followers


More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.