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Jeff Diercks
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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
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  • Performance For June 2014

    June followed the lead of May. More Central Bank meetings. More talking markets up. Very mild corrections, but enough to get signal changes, and then an immediate grind higher on NO volume.

    It is like they (the Central Bankers) are playing the other side of our trend signals!

    In fact, I espoused this to one of my trend following colleagues. "Do you suppose they (Central Banks) are trying to put us out of business? After all, we are really the only investment managers that traditionally do well in Bear Markets. With the "pump and dump" that is likely coming, it just seems like they don't want anyone to do well in the next crisis?"

    My colleague thought about this for a moment and said "maybe!" "It would seem to fit with Washington's "New World Order" agenda."

    Whatever the reason, the hard reality is that the markets managed to move higher in June as you can see below:

    However, the signals and strategies on balance treaded water or lost money.

    Now I could go into a litany of reasons why this is a very dangerous market, but in the spirit of trying to stay positive, I will instead direct you to Henry Bodget's article titled "Sorry, But It's Time To Remind You About The Possibility Of A Stock Market Crash." I think it pretty much says it all with in depth charts and research to back it up.

    The bottom line to me is this market is going to end very badly for the "long only" crowd. It is just a question of when. So hang in there! I know that sounds a bit like a broken record and believe me, I am tired of saying it. Performance

    I mentioned, above, that did ok if you strip out the performance for the NASDAQ and our gold signals.

    Simply put the NASDAQ benefited from the slow grind higher in price. This grind higher was never confirmed in the momentum part of our signal triggers until late in the month. This means we were short most of the month's price run up. Ouch!

    Usually when this happens, there is some short-term pain but the momentum part of the signal is usually right and we are rewarded for our patience. Not this time!

    Gold was a different story! We made big money in gold last year (27%+), however, over the past twelve months gold has continued to consolidate. When it moves to the top of the range, we have lost money. When it falls back, our loss shrinks. Right now we appear to be heading for another test of the upper consolidation boundary.

    The bottom line, as you can see below, is that gold needs to breakout of this range.

    (click to enlarge)

    When it does, we should either get a new buy signal (if it breaks to the upside) or quickly overcome our year-to-date losses (if that break is to the downside). Either way, most of our pain has already been baked in! It is just frustrating to wait on the consolidation to do its job.

    See our performance below:

    As you can see from the performance above, this market is still a very mixed bag and there are obvious few real trends. Just so you don't think all is bad. I do want to point out that we made money in the EAFE Index last month while buying and holding that index would have lost you money in June. The same can be said for our U.S. Dollar signals.

    I also want to point out that the NewEdge CTA Trend Follower sub-index has in recent months picked up. I believe this relative out-performance is entirely commodity driven since their managers tend to drill deeper into oil, metals, softs and other commodities that have risen recently on concerns about war in the Middle East or Central Bank money printing concerns.

    Our DB Commodities signals have benefited, but the rise in oil and gas, as an example, have really been much greater than that of the overall commodities index. This I believe is where their recent relative out-performance has been generated. They also carry less equity market exposure on average and we struggled with that exposure in May and June.

    Our Market Forecast

    Flip a coin, I don't think we can really tell you at this point. Our technical indicators on so many charts, including the VIX, are screaming "caution - overbought markets." However, as long as the Fed and other Central Bankers around the world can keep markets propped up, they could just continue to rise. Rise until they don't that is!

    That last phrase is what worries me.

    That is why we continue to operate our models without modification. We have heard that some trend followers have begun to change their models and processes for this new Central Bank driven market. This I believe is very dangerous!

    This market is at some point going to give us the "mother of all bear markets." I guess I would rather struggle here, give up some upside returns to be protected or profit in that next bear market.

    Do I think that market is coming?

    Yes, you bet I do! I just don't know when and I am tired to trying to guess. My gut tells me it is much closer that we might expect!

    Jul 02 2:37 PM | Link | Comment!
  • S&P 500–The Big Picture

    Sometimes it is helpful to step back from all the noise and take a big picture view. That is what we are going to do today by looking at the S&P 500 Index.

    The S&P 500 index represents the 500 largest companies in the U.S. stock market and is a pretty good gauge of overall market health.

    What we see in the chart below is that at the moment, the trend for the S&P 500 continues to be up and that price action suggests further upside over the intermediate-term.

    Now that does not mean that we may not see some softness over the next few months, but over the balance of the year (barring a crisis) this market looks poised to rise based on this chart.

    (click to enlarge)

    Digging into the details, our oscillator (the RSI) tells us the market is overbought. However, markets can stay overbought for a long time. Longer than you and I have money to bet against further upward movements.

    The middle price chart continues to show the price movements of this index to be moving up in a wedge pattern (blue dotted lines). This pattern is short-term bullish and longer-term bearish. A break of this pattern to the downside would mean a sizeable correction or even a new bear market. So far, however, we have room to the upside and stocks are taking advantage of that room to run.

    Finally, the MACD indicator is more of trend indicator. As long as the histogram is green and the moving averages are rising, the trend is up. That is the case right now despite a bit of a decline in upward momentum in the histogram.

    So the bottom line is that the big picture looks good and U.S. stocks still appear to be a good bet to rise over the balance of 2014.

    Oh! One more thing - my recent post Rollin', Rollin', Rollin'! It Looks Like Trouble Is Near! still holds. I believe we could see some weakness in July and maybe August in the global markets. This correction is obviously taking a bit longer than I expected to show up, but it is still going to happen.

    Tags: SPY, Big Picture
    Jun 27 1:04 PM | Link | Comment!
  • Rollin', Rollin', Rollin'! It Looks Like Trouble Is Near!

    In my market commentary video last Friday, I stated that it looked like we would get a push back towards the highs this week. So far that prediction has held true as the markets now await the Federal Reserve's Open Market Committee Meetings today and tomorrow with the next announcement of any intervention to be announced at 2:30 pm on Wednesday.

    It's not unusual for market rallies or sell offs to happen right before the FOMC meetings as market participants try to anticipate and front run the Fed's next move.

    That being said, post the FOMC meeting (unless the Fed announces something really fantastic), the markets looked poised for a correction. Obviously sentiment remains very high - see my Friday video. The put/call ratio remains very low and the stock markets have had a heck of a run since we last had some sustained market weakness.

    Here is what the charts tell me at this time:

    Note - that same trend line for which price is very extended is likely the target for any market weakness, at least on this first leg down.

    Tags: SPY
    Jun 17 1:05 PM | Link | Comment!
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