This week I'm sharing with you a chart book that I put together for myself periodically to attempt a wide-angle view of markets. You may find bits of it here and there interesting, or the basis of questions you would like to discuss. The chart book contains chart and table data only and is color-coded in most places to be data visualization friendly as you scroll through the pages.
Important Note: This ChartBook focuses on relative performance and chart patterns, and does not consider thematic issues, forward earnings or revenue forecasts, valuation or company fundamentals or credit rating. Those are important factors that should be evaluated before any of the securities identified in this ChartBook are purchased. Relative performance is not a substitution for strategic allocation, and may not be a suitable subject matter for many investors. It may be useful to those with tactical ranges within their strategic allocation, or those seeking to make security substitutions within their allocation based on relative performance, or those operating a short-term tactical sleeve within their portfolio. Do additional research on any security listed here before purchase. These are not recommendations. They are filtered observations of performance over the past 12, 6, 3 and 1 months. This is an investment decision aid, not an investment decision solution.
Based on relative price performance to the S&P 500, this ChartBook identifies small-cap and large-cap growth as leading performance categories among mkt-cap, style, factors, and dividend approaches, as represented by these ETFs:
Based on relative price performance to the S&P 500, this ChartBook identifies the outperforming US sectors, as represented by these ETFs:
Based on relative price performance to the US Aggregate Bond index, this ChartBook identifies no favorable ETF categories. Note that ultra-short-term, investment grade, floating rate debts, tend to have minimal price fluctuation, but competitive total returns in a rising rate environment. That means that securities such as these might be considered as outperformers:
Based on relative price performance to the S&P 500, this ChartBook identifies none of the top 10 developed markets countries and none of the top 10 emerging market countries, nor the world, total international, Europe, emerging markets or frontier markets as outperforming.
Based on relative price performance, a minimum cumulative total return and visual chart pattern inspection, this ChartBook identifies these 12 ETFs as outperforming:
Based on relative price performance, a higher minimum total return than for ETFs, and visual chart pattern inspection, this ChartBook identifies these 11 members of the S&P 100 as outperforming:
Based on relative price performance, a higher minimum total return than for members of the S&P 100, possession of both quality and value attributes (as defined by Vanguard in their VFMF multifactor ETF) and visual chart pattern inspection, this ChartBook identifies these 12 stocks as outperforming:
Based on relative price performance, a lower minimum total return than for S&P 100 stocks, and visual chart pattern inspection, this ChartBook identifies these 12 quality dividend stocks (as defined by Northern Trust in their QDF quality dividend ETF) as outperforming:
A panoramic data document like this ChartBook is intended to not only give a wide perspective on the markets, but also to help unusual or abnormal data to stand out. Scroll through the pages to see what may be of interest to you.
To give you a starting point of reference on many of the pages here are some comments by page number. The comments are not complete. They may help you get into the data on each page.
- Page 2 - Yield Curve: the yield spread between short-term rates and intermediate-term rates is compressing rapidly but still positive; and in the past when shorter-term rates become larger than longer-term rates it has signaled a coming recession and the decline in stock prices. We aren't there yet, but this is a risk factor to be closely watched.
- Page 3 - Forward Earnings Estimates: the 20% earnings growth rate expected for 2018 contrasts with the 10% earnings growth rate projected for 2019. The growth rate for 2018 is exceptional, and is partly due to a quantum, one-time increase in corporate profits due to recent tax legislation. Slower growth in 2019 may cause some compression of price-earnings multiples.
- Page 4 - PEG ratios (price earnings ratio divided by five year forecasted earnings growth rate) appear to be most attractive for Consumer Cyclicals among large-cap, mid-cap and small-cap US stocks; and you will see on page 19 that they show favorable momentum as well; but on page 5 they look a bit expensive versus historical valuations.
- Page 5 - telecommunications services looks inexpensive, but in September that sector will be redefined as Communication Services and will include some stocks from Consumer Discretionary and from Information Technology, so those numbers really aren't useful now. If we're lucky analysts will restate history based upon the reconfigured sectors sometime later this year.
- Page 6 -US stocks are in good trend condition as are international stocks overall, but Europe is wavering and emerging markets are down (as are real estate and gold). Even though the China ETF MCHI is still in an intermediate uptrend, you will see later on page 14 that the overall China market is doing poorly, and the larger-cap stocks represented by the ETF have broken down on a daily chart basis.
- Page 7 -shows fundamental data for key equity categories revealing more attractive price to cash flow multiples for foreign stocks versus domestic stocks as well as higher yields: and it shows better Sharpe Ratios (basically return divided by volatility) for minimum volatility and momentum factor funds, and attractive ROE levels for quality minimum volatility and momentum factor funds.
- Page 8 - taxable bonds are all in downtrends and some municipal bonds are not trending upward or are wavering.
- Page 9 - Some bond categories show extraordinary interest rate risk as evidenced by the duration being substantially larger than the yield. As a rule of thumb, if the interest rate on the fund rises by 1% over a short period of time, the price will decline by the duration times the change in interest rate. Long-term government bonds are less than 3% and have more than 17 years of duration - dangerous. Long-term corporate's pay less than 5% and have almost 14 years of duration - also dangerous in this time of rising Federal Reserve rates, rising GDP, and rising inflation.
- Page 10 - S&P 1500 Buying and Selling pressure: net buying pressure began to decrease in the beginning of 2017 and has become flat to negative this year. It is a divergence from the rise in stock prices during that time. This is a cautionary sign. The indicator measures the total amount of money flowing through rising stocks divided by the total amount of money flowing through all stocks.
- Page 11 - the percentage of stocks in Correction, Bear or Severe Bear have been in rough synchrony with price movements of the Standard & Poor's 1500 stocks since 2017, and no particular signal is generated there.
- Page 12 - the percentage of stocks within 2% of their high is in a normal range and is acting in synchrony with stock prices. There is no signal there.
- Page 13 - the percentage of stocks above their 200-day moving average is at a healthy level, continuing to support rising stock prices.
- Page 14 - breath is best in the USA, second-best at okay levels in Europe. Japan is in a week third place. Larger China market is doing badly with the median stock off more than 30% from its high, and 90% in a Correction and 75% in a Bear or worse. The chart below the table, however, shows the effect of what is called "sequence risk". Someone who invested in China a year ago is doing okay, but someone who invested at the beginning of this year is doing very badly. The intermediate trend for China shown on page 6 is still positive, but a detailed review of the chart shows that it is near a turning point, and this daily chart on page 14 reveals that breakdown more clearly.
- Page 15 - looking at stocks in terms of regions, market-cap, style, factors, dividends and real assets; only small-cap and large-cap growth show good price momentum, as indicated by the light green shading on the symbol and name
- Page 17 - looking at bonds only T-Bills and ultra-short-term investment grade floating rate bonds show price behavior that is positive. Note these are price returns, not total returns. The total return on US investment grade ultra-short-term floating rate bonds is higher than for T-bills. We have effectively shifted virtually all of our bond allocation to ultra-short-term investment grade floating rate bonds some time ago, and expect to remain there through the Fed rate hike cycle. You can see the steady positive return of ultra-short-term investment grade floating rate bonds relative to the aggregate bond index in the middle chart in the top line of page 18.
- Page 19 - among US sectors Technology has the strongest price momentum, even though the last week was tough for some. Consumer Discretionary sectors also have good momentum.
- Page 21 - none of the top 10 Developed market countries or top 10 emerging market countries have favorable price momentum.
- Page 23 - there are some ETF's with favorable price momentum. They are primarily found in the Technology and Healthcare sectors.
- Page 25 - less than 15% of the Standard & Poor's 100 stocks have good price momentum, and they come from various sectors
- Page 27 - within the Russell 3000 (essentially the entire US market of stocks of consequence) there are 100 or so stocks with good momentum that also have good Quality and Value characteristics (as determined by Vanguard via their multi-factor fund VFMF). This page shows those with the largest 12-month price gains, and the following page 28 shows those that gained at least 200% over three years and have the best shape curves among those with favorable momentum.
- Page 29 - looking at the 150+ stocks selected by Northern trust as "quality" dividend stocks, a limited number have favorable price momentum, and page 30 shows those 12 with the best shaped three year curves among them.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Disclosure: QVM has positions in some of the securities identified in this article as of the publication date. We may or may not sell those securities or purchase others on the list at any time. We certify that except as cited herein, this is our work product. We received no compensation or other inducement from any party to produce this article, and are not compensated by Seeking Alpha in any way relating to this article.
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