Morning Brief* – May 28, 2014
Morning Market Brief.
Macro economy in terms of business cycle model-
5/28- Durable Goods Orders, FHFA Home Price, S&P Case-Shiller HPI, PMI Services Flash, Consumer Confidence and Richmond Fed Manufacturing Index were all supportive of the bullish model stance. 5/22-The 9yr cycle is up until late this decade when a recession will occur. Last bottom was 2009. Last top was 2007.
Markets in terms of business cycle model:
L5-L13 trends durations are hours to fraction of one second.
L4 trend duration is ½ to 2 days. Intra-week trend. A very short term trend.
L3 trend duration is 2 days to 2 weeks. Intra-month trend. A short term trend.
L2 trend duration is 1 to 2 months. Minor intermediate intra-year trend.
L1 trend duration is 1 to 5 months. Major intermediate intra-year trend.
3yr cycle trend duration is 5 to 27 months. Minor long term trend. Intra-decade trend. Can make or break your business and investment year. But can be choppy at times. May relate to famous Kitchin cycle used in business and economic analysis.
9yr cycle trends last a few years to nearly a decade. Major long term cycle. Intra decade to decade. Economy follows this cycle with growth trends of 7 to 12 years and recession trends of 1 to 3 years. This cycle is found in weather/climate, production, consumption, prices. Similar to same cycle as the Juglar cycle used by business and economy analysts.
Super cycles- 27/36, 54/72, and 216 years. Create trends lasting a decade to a century.
See end of document for favorite technical studies.
All trends integrate for the big picture- for a clock like model. Consider people conduct business on a basis of daily, weekly, monthly, quarterly/semi annual. Relative society, monetary, multi-generation, plus business, people create trends on a basis of decade, century, etc. The second hand of a clock times the minute hand that times the hour hand.
Managed Alternative Investment-5/4- My fund, CWL, posted a new record high for March and gave back a little during April. The fund continues to behave like a hedge fund and out performs CTA indexes. CTAs have underperformed as a group for three years. Hedge funds out performed CTAs, but underperformed the stock market.
Commodities –(mostly based on DJUBS index)–5/18- L2 top as expected week of March 3 and L1 top week of May 2. L2 bottom week of 3/24. Trend is to be down into L1 bottom due near end of month. Anticipate June to be an upswing month. Long-term 3yr and 9yr cycles bottomed January 2014. (Some indexes bottomed earlier.) The long-term trend is up until late this decade. Commodities were in a bear market from 2011 to 2013 and contrary to the overall economy and the stock market. Commodities have now joined the economy growth cycle. Supply was balanced to what the economy could afford as of 2013.
Stocks – L3 trend(next 5 days)-5/28-L3 bottom April 28 and May 7 or 15th. Trend was up as expected and from last peak May 13. A long-term stair step objective of 1910 was met, but in greater detail this level is likely meaningless. A top can arrive week of May 28 and allowed to extend until early following week. There is upside potential for 1920s. L1/L2 trend(next 2 months)-5/28- L1 cycle up trend until early June and with potential for 1910 to 1940 for SP500. A bull market began from last year relative 3yr cycle and will last until some time 2015. The 9yr business cycle is bullish until 2017 to 2019. Shanghai SE 50 index over 1565.17 a long-term bullish sign. If trade over 15164.39 Nikkei 225 consider the 3yr cycle has returned to bullish. I remain long-term bullish India. Eurozone is out of recession and a bull market for stocks is underway.
Euro Forex –L1/L2 trend(next 2 months)-5/28-L2 top May 8 was as expected. Trend is down until sometime June. 1.36?
Yen Forex –L1/L2 trend(next 2 months)-5/28-L1 bottom that occurs two to three times per year was placed May 21. A long-term 3yr cycle bottom should occur as well. A L1 uptrend offers strength for the dollar side for first half summer, while the long-term trend offers strength for this year if not until early next.
Gold – L1/L2 trend(next 2 months)-5/28- The trend is down unless trade over $1294. Still long-term bullish but still do not see reason for a significant move higher.
Oil-L1/L2 trend(next 2 months)-5/22- AUG is worth $105 to $107.
Additional model input-
Core model is cyclical price only. Total model research includes conditions from quantitative, fundamental, and economic studies as well as simple observation (discretion opinion), plus cycle model concept applied to a variety of fundamental/economic data including PMI, nominal GDP per capita, various supply/demand data, and climate. The core model and the use of the concept applied to non price data is called Cycle Series Analysis.
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Alternative investment managed by Richard Posson. www.capturawealth.com