COMING SOON: The Fab Five Portfolio on Seeking Alpha's Marketplace.
The The Fab Five Portfolio is a risk-managed, growth portfolio providing designed exclusively for Seeking Alpha members. In short, the idea is to provide institutional investing strategies to the individual investor. This multi-strategy portfolio will be managed live, in real-time, by 30-year portfolio manager, David Moenning. The portfolio is comprised of 3 "Risk Managed Growth" models, our "Top Gun" stock strategy (10 top-rated stocks), and our "Market Leaders" strategy.
Now that the shameless plug for the new service I'll be running is out of the way, let's move on to the state of my key market models...
The State of the Big-Picture Market Models
I like to start each week with a review of the state of my favorite big-picture market models, which are designed to help me determine which team is in control of the prevailing major trend.
- The average return of the Primary Cycle board's components appears to tell the whole story here. In short, while there are risk factors such as monetary conditions and valuation that are elevated, the trend and internal health of the market remains sound. As such, the bulls deserve the benefit of any doubt.
The State of the Trend
Once I've reviewed the big picture, I then turn to the "state of the trend." These indicators are designed to give us a feel for the overall health of the current short- and intermediate-term trend models.
- Last week, I opined that the trend of the S&P 500 was not actually as strong as the trend board might suggest. This week, I will retract that statement as the venerable index broke out of resistance and is in an uptrend. Advantage Bulls.
The State of Internal Momentum
- The market's internal momentum remains in good shape. 'Nuff said. Advantage Bulls.
The State of the "Trade"
We also focus each week on the "early warning" board, which is designed to indicate when traders might start to "go the other way" -for a trade.
- This week's "Early Warning" board doesn't clearly favor the bears yet (from a short-term perspective), but it does appear to be moving in that direction. Thus, we will give the bears a slight near-term advantage.
The State of the Macro Picture
Now let's move on to the market's "external factors" - the indicators designed to tell us the state of the big-picture market drivers including monetary conditions, the economy, inflation, and valuations.
- We have made some additional changes to the External Factors board. First, we have added an earnings component. Next, we have consolidated the Monetary and Valuation models into a composite. We believe the changes makes the board more useful and the addition of an earnings components helps partially offset the monetary and valuation conditions and brings the overall board more toward neutral.
Dynamic Asset Allocation Model
Below is an EXAMPLE of how one might utilize the indicator boards in a portfolio. The idea is to dynamically determine the appropriate equity allocation for a flexible, balanced asset allocation model with a base target of 60/40 stocks/bonds.
The overall intent of the model is to keep equity exposure in line with current conditions. Since the model is updated monthly, we take a longer-term approach and allocate 40% of the exposure to Environmental factors, 40% to Trend and Momentum factors, and 20% to Sentiment.
The model above is for illustrative and informational purposes only and does not in any way represent any investment recommendation. The model is merely a sample of how indicators can be grouped to create a guide to market exposure based on the inputs from multiple indicators/models.