A Solid Model
The Model. The KP Trend Model is Green. Full policy exposure to US equities. From the Trading Room. It has been just one week since our trend model returned to Green on Friday, April 26 after a very brief six trading days in Yellow status. As we’ve said many times, the Model doesn’t read newspapers and thus doesn’t “know” anything. As tempting as it might be, we can’t read any special meaning into these short-term reversals — they simply reflect the underlying mathematics which process a mountain of daily market data. Given the inherent tendency of financial...
Read MoreTrend Model Shifts to Yellow
The Model. Effective the market close last Wednesday, April 17, the KP Equity Trend Model shifted to a Yellow status — reduced exposure to US equities. From the Trading Room. The Intermediate-Term Trend Model (KP-1) has shifted to negative — its first change of direction this year. The sharp decline in the red Model Line (below) reflected a significant acceleration of downward internal pressure last week. Among other things, this change shifted the equity exposure of our active large-cap US portfolio to 50% equities and 50% fixed income. Over the last 20 years, this...
Read MoreStill Worried About Breadth
The Trend Model. Both elements of our trend modeling process remain Green. Full policy exposure to US equities. From the Trading Room. Healthy equity markets are often said to be “broad,” meaning that most stocks are participating in the upward trend. As market advances mature, they are often described as “narrowing,” — fewer issues participating. Narrowing conditions often precede important tops. Accordingly, we monitor market breadth in various ways to remain vigilant for upcoming changes in the trend models. This week, we present a two-year chart depicting the...
Read MoreGreen, With a Few Footnotes
The Model. Our KP Trend Model remains Green, suggesting maximum policy exposure US equities. From the Trading Room. Over many decades, technical analysts have noted that important market tops tend to be preceded by a “thinning” of participation — a technical phenomenon where prices of the major indices — dominated by a small number of very large stocks — continue marching upward while many other more average stocks struggle to participate. For example, a recent comparison of the Nasdaq Industrial Index ($INDS) and the S&P 500 ($SPX): This kind of...
Read MoreMaturing Bull
The Model. The KP Trend Model remains Green. Full policy exposure to US equities. From the Trading Room. The KP Trend Model has two two elements: A price-based long-term trend study that changes direction less than once a year — it is currently positive by a considerable margin: We pair this study with the more sensitive (5.2 trades/year) KP-1 Model (below) which is based entirely on internal, non-price data. Since the underlying concept is completely different, this study has shown itself to be synergistic with the Long-Term Model. In combination, both produce a better...
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