Sell Signal Visible, But No Signs Of A Major Top
Cam Hui | Sep 15, 2014 12:25AM ET
Trend Model signal: Risk-on
Direction of last change: Negative (downgrade)
The actual historical (not back-tested) buy and sell signals of the Trend Model are shown in the chart below:
This is a good news and bad news kind of market. The bad news is that US equities appear poised for a pullback of some fashion. I had indicated last week that momentum was faltering and it may be prudent to pare back some positions around month-end (see
When I put it all together, the weight of the evidence suggests that the major US equity indices are due for a pullback of some sort, but the longer term trend is still up. At this point, the depth and duration of any potential market weakness is unknown. We will have to wait to see how the fundamentals develop.
My inner investor remains relatively unfazed, as the Trend Model remains in at a risk-on signal and market fundamentals remain sound.
On the other hand, my inner trader has noted that the direction of the Trend Model change is negative, which represents a tactical sell signal. My inner investor got stopped out of his long positions last week and he has taken on a small short position. He is highly nervous as event risk this coming week (FOMC meeting, Scottish Referendum) is likely to produce volatility and a high risk of whipsaw, which is anathema to the trend following models that he is using.
Disclosure: Long TZA
Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.
None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.
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