Tuesday, February 14, 2012

Mid Feb Coppock, Long MACD, Modified Turtle and Dashboard Update

My long term MACD indicators are saying BUY for the major markets I watch, The All Ords moving averages directions and crossovers other than 50 > 200 are saying BUY, but the traditional Coppock is saying "not yet" for the markets I follow (although the All Ords is neutral mid month). My big reservation for the All Ords is that it may still be range bound between 3900 and 4500 and my modified Turtle indicator has not signalled a buy, although it is set for few whipsaws. It requires a breakout above 4450 but having been whipsawn once I am looking at 4500.

Coppock Dashboard (including MACDs, using close US ETF as a proxy when looking at USD values).

Note that I have added a percentiles row in the Coppock Table. 4 of the 6 markets listed have Coppock scores in the lowest 30% in the history I have. Japan is unusual in that it has been in a Secular decline for over 20 years with progressively lower ending bear markets, so its Coppock score's relatively high percentile reflects that. one day Japan might move into a secular bull market, although its demographics are against it.

All Ords Dashboard including Coppock, Modified Turtle and Median Bottom Comparison (1 & 2 Yr growth).

Note that other than Coppock, modified Turtle and 3 year growth rate everything looks BUY. I think the 50 > 200 cross is too subject to whipsawing to be a first indicator of a BUY or SELL, so I tend to discount it.

I note that we are still around a medium term bottom in terms of 1 and 2 year growth, but as we approach the 3 year anniversary of the March 2009 bottom the 3 year growth and its percentiles become more worrisome.

At 4400 it would be 40% and 81st percentile.

At 4900 it would be 58% and 91st percentile.

As we pass the 3rd anniversary then it is possible that even if the All Ords stays relatively stable 3 year growth will moderate as the lows fall out of the period, but 4 year growth may increase as the 2008 highs fall out of the 4 year period. Remember, periodic growth figures are as much about what has fallen out of the start of the period as about the recent changes in the market. both ends of the period count.

Modified Turtle Says Not Yet

Because we are below the previous recent peaks around the 4400 mark there is a real risk of being whipsawn by a range trading market. The modified Turtle indicators are set to minimise risk of being whipsawn.

My Modified Turltle is not a guarantee against whipsawing, but it is set to minimise them, but at the cost of missing some rise before buying and enduring some fall before selling so any whipsaw will be costly. The BUY and SELL are 8.6% apart at present.

Fundamentals, GDP, Emerging Markets and Comparative Bond Yields not considered.

I have not considered fundamentals, fiscal settings or relationships with GDP and Bond Yield in any detail in this post. This post is primarily about market timing indicators.

 I remain concerned about recession risk in Australia. My indicator is YOY employment growth being flat and trending down, a strongly inverted yield curve 3M to 3Yr and 3M to 10Yr and AUD still very high and recently increasing hurting manufacturing and tourism.

All Ords growth compared to GDP growth is at a relatively low level, even if the extraordinary growth in the All Ords from '74 to '87 as PE ratios adjusted from 5.4 to 20.1 is discounted.

10 Year Bond yields are reflecting a strong preference for Government Bonds over Shares. This could lead to a PE re-rating over time, or could indicate danger for bond prices if there were no recession and emerging inflation leading to rises in rates across the yield curve or a liquidity squeeze because of our dependence on offshore savings to finance our debt. I regard inflation as unlikely given Australian fiscal policy of striving for surplus next year, but the squeeze on offshore funding is already evident from the recent bank rises in variable mortgage rates.

My article on the Cream Portfolio shows that a mix of 6 Emerging Markets have been very good over 10 years and seem very consistent and still trending well.

If the trend is your friend, then subject to the whipsawing and range trading caveat, its now, when Coppock turns up or at over 4500.

Maybe 1/3, 1/3, 1/3 is something to consider.

Not Financial Advice

As always, this is not financial advice, just my thoughts on investing which may be totally inappropriate for other people's circumstances and which change with changing markets. While history may rhyme, it may not be a good guide to the future.

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