Trend 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 the 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 MoreThe Volatility of Oscillators
The Model: The KP Trend Model is Green, full exposure to US equities. From the Trading Room: Internals have continued to weaken as the major market indices all ended lower this week. This weakness is a concern, especially when it coincides with a sharp increase in volatility. The KP Short-Term Internal Oscillator that was last overbought in February, has been weakening since, and it fell into modest oversold territory this past...
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 MoreDivergences vs Momentum
The Model: The KP Trend Model continues Green, full exposure to US equities. From the Trading Room: The divergences we’ve been noting between the price performance of major indexes and our technical studies have become an ongoing concern for us. Certainly, all of is early since the indices remain their near all-time highs. For example, the KP Long-Term Model has been Green for more than a year, and the KP Intermediate-Term Model has been Green since last...
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 MorePossible Momentum Pause
The Model. The KP Trend Model continues Green, full exposure to US equities. From the Trading Room. Last week, we saw signs of a potential slowdown or pause in momentum, both with price and with the internal data. This slowdown is evident in the chart of the Intermediate-Term Model below. Our Tactical Exposure Study also Illustrates the pause by descending below its red neutral line and shifting to a ‘Plus 2’ status, which we read as ‘modestly oversold in the context of the advancing market trend.’ Assuming that the uptrend remains intact, the study suggests a...
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