Colby Global Markets Report Prices and rankings as of the close on Friday, December 14, 2018 Contents Update on Major Asset Classes, with charts ................................................................................1 9 major U.S. stock sectors ranked in order of Relative Strength ................................................16 Top 10 ETFs Ranked by Major Trend Relative Strength ............................................................22 Ranked: 143 Select Exchange Traded Funds (ETFs) ................................................................23 More Exchange Traded Funds (ETFs) and Closed-End Listed Funds Ranked ..........................27 Colby Economic Expectations Index...........................................................................................49 Summary • The Dow Theory is near a critical juncture. The Dow Jones Industrial Average must hold above its 2018 closing price low at 23,533.20 in order to avoid a major sell signal. • The Dow Jones Transportation Average already broke below its 2018 low. • Historically, seasonal tendencies have been bullish from now to year end. • Sentiment is extremely oversold after last week's price drop. • Short-term stock price trends show unmistakable weakness, but short-term trends can change suddenly and frequently. The markets remain subject to substantial headline risk. • The medium-term trend stock market indicators have deteriorated further but still may be consistent with a significant medium-term downside correction. • Only 32.4% of the S&P 500 stocks are above their 200-day simple moving averages. That is the lowest since February, 2016, and it is a sign of significant price weakness. • Long-term trends may be in the process of changing. The more stocks and indexes that break down below their lows the year, 2018, the greater the increase in bearish probabilities. • Medium-term U.S. stock sector rotation still favors defensive sectors: Utilities, Consumer Staples, and Health Care are outperforming. That reflects bearish sentiment. • Cyclical sectors are underperforming: Energy, Financial, Industrial, Materials, Technology, and Consumer Discretionary are relatively weak. That reflects a lack of bullish confidence. • MidCap and SmallCap stock price indexes fell to new lows and remain systematically bearish. That also reflects a lack of bullish confidence. • United States Oil ETF (USO) has stabilized somewhat after an extremely steep price collapse lasting 8 weeks. USO remains oversold--and still subject to headline risk. • Fixed-income US Treasury Notes and Bonds prices are outperforming High-Yield Junk Bonds, reflecting bearish market sentiment. • The U.S. Dollar remains in an uptrend. • Foreign stocks mostly remain systematically bearish.
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Colby Global Markets Report
Prices and rankings as of the close on Friday, December 14, 2018 Update on M ajor Asset Classes, with chart s
Contents
Update on Major Asset Classes, with charts ................................................................................1
9 major U.S. stock sectors ranked in order of Relative Strength ................................................ 16
Top 10 ETFs Ranked by Major Trend Relative Strength ............................................................ 22
More Exchange Traded Funds (ETFs) and Closed-End Listed Funds Ranked .......................... 27
Colby Economic Expectations Index ........................................................................................... 49
Summary
• The Dow Theory is near a critical juncture. The Dow Jones Industrial Average must hold above its 2018 closing price low at 23,533.20 in order to avoid a major sell signal.
• The Dow Jones Transportation Average already broke below its 2018 low.
• Historically, seasonal tendencies have been bullish from now to year end.
• Sentiment is extremely oversold after last week's price drop.
• Short-term stock price trends show unmistakable weakness, but short-term trends can change suddenly and frequently. The markets remain subject to substantial headline risk.
• The medium-term trend stock market indicators have deteriorated further but still may be consistent with a significant medium-term downside correction.
• Only 32.4% of the S&P 500 stocks are above their 200-day simple moving averages. That is the lowest since February, 2016, and it is a sign of significant price weakness.
• Long-term trends may be in the process of changing. The more stocks and indexes that break down below their lows the year, 2018, the greater the increase in bearish probabilities.
• Medium-term U.S. stock sector rotation still favors defensive sectors: Utilities, Consumer Staples, and Health Care are outperforming. That reflects bearish sentiment.
• Cyclical sectors are underperforming: Energy, Financial, Industrial, Materials, Technology, and Consumer Discretionary are relatively weak. That reflects a lack of bullish confidence.
• MidCap and SmallCap stock price indexes fell to new lows and remain systematically bearish. That also reflects a lack of bullish confidence.
• United States Oil ETF (USO) has stabilized somewhat after an extremely steep price collapse lasting 8 weeks. USO remains oversold--and still subject to headline risk.
• Fixed-income US Treasury Notes and Bonds prices are outperforming High-Yield Junk Bonds, reflecting bearish market sentiment.
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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The latest AAII survey indicates extremely oversold sentiment, now with 20.90% Bullish, 30.23% Neutral, and 48.87% Bearish. The CNN Money Fear & Greed Index fell to a extremely oversold level of 8, down from 22 two weeks ago. It has ranged from an overbought 75 on 9/21/2018 to an extremely oversold reading of 5 on 10/11/2018. For details, see http://money.cnn.com/data/fear-and-greed/
$VIX Volatility Index remains at above-average, oversold levels. Last year's lows below 10 were among the lowest levels in decades, indicating extreme overbought greed. Extremely low Implied Volatility has preceded every past financial market dislocation. Precise pinpoint market timing is not included with this indicator, however.
The Equity Put/Call Ratio is at high, oversold levels. Options speculators typically react to the price action: when stock prices go up they trade more calls and when stock prices go down they trade more puts. The Art of Contrary Thinking would suggest becoming more bullish as this P/C ratio rises toward extremely high levels and more bearish as it falls to extremely low levels.
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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$INDU, Dow Jones Industrial Average Short-term trend: down Medium-term trend: down Long-term trend: systematically neutral, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA above the 200-day SMA Dow Theory May Be Approaching A Major Signal: The Dow Jones Industrial Average appears to be approaching a critical price level at its closing price low for the year on March 23, 2018, at 23,533.20. The Transportation Average already closed below its closing price low of 2018. Both Averages must close at new lows, however, for a Dow Theory Bear Market signal to be confirmed. At this time, our interpretation of a Dow Theory Secondary Reaction (that is, a medium-term downside correction) still stands. The Dow Theory is subject to subtle interpretations at times. Although the Dow Theory has been a useful tool over many decades, it is not infallible, it sometimes gives false signals, and it is but one of the many methods we analyze each day.
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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$TRAN, Dow Jones Transportation Average Short-term trend: down Medium-term trend: down Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
$UTIL, Dow Jones Utility Average Short-term trend: up Medium-term trend: up Long-term trend: systematically bullish, above the 50-day SMA, above the 200-day SMA, and with the 50-day SMA above the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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$NYAD, Cumulative Daily Advance-Decline Line for all stocks listed on the NYSE Short-term trend: down Medium-term trend: down Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
$NYUD, Cumulative Daily Advancing-Declining Volume Line Short-term trend: down Medium-term trend: down Long-term trend: systematically neutral, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA slightly above the 200-day SMA
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$NYHL, Number of Daily Net New Highs on the NYSE Short-term trend: down Medium-term trend: down, hit its lowest level in nearly 3 years on 12/6/2018 Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
SPY, SPDR S&P 500 ETF Short-term trend: down Medium-term trend: down Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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QQQ, PowerShares QQQ Trust, Series 1, Nasdaq-100 Index ETF Short-term trend: down Medium-term trend: down Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
OEF, iShares S&P 100 LargeCap ETF Short-term trend: down Medium-term trend: down Long-term trend: systematically neutral, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA slightly above the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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MDY, SPDR S&P MidCap 400 ETF Short-term trend: down Medium-term trend: down Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
IWM, iShares Russell 2000, SmallCap Index ETF Short-term trend: down Medium-term trend: down Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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BKF, iShares MSCI BRIC Short-term trend: down Medium-term trend: down Long-term trend: systematically neutral, above the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
EEM, iShares MSCI Emerging Markets Short-term trend: down Medium-term trend: down Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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EFA, iShares MSCI EAFE Short-term trend: down Medium-term trend: down Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
TLT, iShares 20+ Year U.S. Treasury Bond Short-term trend: up Medium-term trend: uncertain, possibly turning up Long-term trend: systematically neutral, above the 50-day SMA, above the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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IEF, iShares 7-10 Year U.S. Treasury Bond Short-term trend: up Medium-term trend: up Long-term trend: systematically neutral, above the 50-day SMA, above the 200-day SMA, and with the 50-day SMA below the 200-day SMA
JNK, SPDR Barclays High Yield Bond ETF Short-term trend: down Medium-term trend: down, relatively weak Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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TIP, iShares TIPS Bond Short-term trend: down, relatively weak compared to TLT Medium-term trend: uncertain Long-term trend: systematically neutral, above the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
UUP, PowerShares DB US Dollar Bullish ETF Short-term trend: up Medium-term trend: up Long-term trend: systematically bullish, above the 50-day SMA, above the 200-day SMA, and with the 50-day SMA above the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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DBA, PowerShares DB Agriculture ETF Short-term trend: uncertain Medium-term trend: down Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
USO, United States Oil ETF Short-term trend: down Medium-term trend: down, but oversold Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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GLD, SPDR Gold Shares Short-term trend: uncertain Medium-term trend: up Long-term trend: systematically neutral, above the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
GDX, Market Vectors Gold Miners ETF Short-term trend: uncertain Medium-term trend: uncertain Long-term trend: systematically neutral, above the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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SLV, iShares Silver Trust Short-term trend: uncertain Medium-term trend: uncertain Long-term trend: systematically neutral, above the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
JJCTF, iPath Bloomberg Copper Subindex Total Return ETN Short-term trend: uncertain Medium-term trend: uncertain Long-term trend: systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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9 major U.S. stock sectors ranked in order of Relative Strength:
Rank Stock Sectors Ranked by Relative Strength CLOSE C/50 SMA C/200 SMA 50/200
The table above shows our quantitative Relative Strength Rankings ("Rank", to the left) together with ratios of pure price performance in 3 different time frames: medium, longer, and longest term ("50/200" to the right). Sectors Ranked above 50 (as shown in the 1st column to the left) are demonstrating above-average Relative Strength, according to our completely objective quantitative algorithm. Those are the sectors most likely to outperform going forward. Sectors Ranked below 50 are demonstrating below-average Relative Strength and are most likely to underperform going forward. These rankings are computed using our proprietary quantitative algorithm and are not based on simple moving averages. The 3 columns on the right offer a different perspective on sector strength. They quantify each sectors' absolute price strength relative to the most widely-accepted simple moving averages (SMAs), expressed as a percentage of a shorter time period price divided by a longer time period's average price. C/50 is the latest closing price (C) divided by the 50-day SMA, and it indicates a medium-term view of performance. C/200 is the latest closing price (C) divided by the 200-day SMA and indicates a longer-term view. The longest-term view is shown by the 50/200, which is the 50-day SMA divided by the 200-day SMA. These ratios offer different views of the strength of each sector in 3 different time frames. Investors seeking to maximize returns should concentrate in the higher-ranked, strongest sectors while avoiding the lower-ranked, underperforming sectors. Relative Strength has worked very well for many decades, outperforming nearly every other method of stock selection.
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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Utilities stock sector remains systematically bullish, above the 50-day SMA, above the 200-day SMA, and with the 50-day SMA above the 200-day SMA
Consumer Staples stock sector remains systematically neutral, below the 50-day SMA, above the 200-day SMA, and with the 50-day SMA above the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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Health Care stock sector remains systematically neutral, below the 50-day SMA, above the 200-day SMA, and with the 50-day SMA above the 200-day SMA
Consumer Discretionary stock sector remains systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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Technology stock sector remains systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Materials stock sector remains systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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Industrial stock sector remains systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Financial stock sector turned systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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Energy stock sector remains systematically bearish, below the 50-day SMA, below the 200-day SMA, and with the 50-day SMA below the 200-day SMA
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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Top 10 ETFs Ranked by Major Trend Relative Strength This list, updated each week, outperformed the S&P 500 since August, 2004, in simulation. To arrive at our Top 10 ETFs selections, we first measure trend momentum of each ETF over a long time frame spanning many months, according to our objective proprietary formula. Next, we rank 143 of the most important ETFs, from highest to lowest. Finally, we select the ten highest-ranked, best-performing ETFs, the ones with the strongest major trend price momentum. Research studies suggest that ETFs ranked in the top decile may have a greater probability of outperforming the market in the months ahead, while low ranked ETFs may have a greater probability of underperforming. For details on Relative Strength Ranking, please see Robert W. Colby's book, The Encyclopedia of Technical Market Indicators, Second Edition (2003), pages 604-609, or see our White Paper, "Introduction to the Screening Method for Analysis of Relative Strength", by Robert W. Colby, CMT, outlining some of the research behind our Relative Strength Ranking Method. Please note that this is a high-volatility strategy: the stocks that go up the most when the stock market is in a Bullish trend often go down the most during market corrections to the downside. In addition, please note that this Top 10 list is a research study and is not investment advice. Your use of this report means that you have read, understood, and accepted our Disclaimer on the last 2 pages of this report.
Rank Stock Relative Strength Rank Symbol CLOSE C/50 SMA C/200 SMA 50/200
92 Real Estate US DJ iS, IYR IYR 80.33 1.39% 1.91% 0.51%
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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Ranked: 143 Select Exchange Traded Funds (ETFs) This list is filtered to exclude leveraged and inactive ETFs trading less than 90,000 shares a day on average. Ranks are based on our updated version of the Screening Method for Analysis of Relative Strength, using a proprietary formula, which measures trend momentum over a long time frame spanning many months. For details on Relative Strength Ranking, please see Robert W. Colby's book, The Encyclopedia of Technical Market Indicators, Second Edition (2003), pages 604-609, or see our White Paper, "Introduction to the Screening Method for Analysis of Relative Strength", by Robert W. Colby, CMT, outlining some of the research behind our Relative Strength Ranking Method. Research studies suggest that ETFs ranked in the top decile (highest tenth) of the list may have a greater probability of outperforming the market in the months ahead, while low ranked ETFs have a greater probability of underperforming. Rank, Interpretation 100 to 90, Buy 89 to 70, Hold 69 to 50, Neutral, Market Perform 49 to 30, Avoid 29 to 0, Sell
Rank Stock Relative Strength Rank Symbol CLOSE C/50 SMA C/200 SMA 50/200
1 Oil Fund PowerShares, DBO DBO 9.62 -15.66% -18.70% -3.60%
1 Oil, Crude, U.S. Oil Fund, USO USO 10.82 -16.39% -20.91% -5.40%
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More Exchange Traded Funds (ETFs) and Closed-End Listed Funds Ranked This list includes short, leveraged, and inactive funds trading less than 90,000 shares a day on average. Use caution when trading these funds. Rank, Interpretation 100 to 90, Buy 89 to 70, Hold 69 to 50, Neutral, Market Perform 49 to 30, Avoid 29 to 0, Sell
Rank Stock Relative Strength Rank Symbol CLOSE C/50 SMA C/200 SMA 50/200
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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Colby Economic Expectations Index
Our Colby Economic Expectations Index turned down after 9/13/18, meaning that recent actual economic reports have been disappointing relative to economists' expectations. Nevertheless, the Federal Open Market Committee (FOMC) is forecasting continued solid growth of the U.S. economy, and the FOMC rates the overall risks to financial stability as moderate.
Financial Stress (revised) has begun to rise from extremely low levels. A high level with a rising trend is negative for the economy and for stock prices. A low level with a declining trend is positive for the economy and for stock prices. The Chicago Fed’s National Financial Conditions Index (NFCI) provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems.
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The Conference Board's Leading Economic Index turned down, possibly suggesting a slower pace of economic expansion ahead.
The Conference Board's Consumer Confidence Expectations Index (a leading economic indicator) remains at historically high levels, suggesting continuing economic growth.
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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The University of Michigan's Consumer Expectations Index remains at historically high levels, suggesting continuing economic growth.
The ISM Manufacturing New Orders remain well above the 50 level, which is the dividing line between expansion and contraction.
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Personal income and personal spending growth rose in October and continue to indicate growth trends.
Real GDP increased at a seasonally adjusted annual rate of 3.5% in the third quarter. Price inflation rose at a relatively subdued 1.7% annual rate.
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Industrial production growth slowed slightly but remains in a strong and persistent uptrend.
The Philadelphia Fed Index turned down since its peak in June, 2018. Although the Index now indicates slower growth, it will remain positive as long as it holds above the zero dividing line between growth and contraction.
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Housing starts and building permits both slowed somewhat since March, 2018--reflecting headwinds builders are facing due to higher costs of materials, labor, land, and loans (rising interest rates).
Retail sales growth slowed somewhat recently but still shows positive growth.
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Orders for nondefense capital goods excluding aircraft has lost a little of its upside momentum since November, 2017, but the trend still points to growth of orders.
New home sales fell steeply to the lowest level since March, 2016, due to rising house prices and rising mortgage rates. The 8-year rising trend appears to be broken. Note that the sharp decline in 2006-2007 offered an early warning of economic trouble ahead, so new home sales warrant our continuting attention.
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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Initial claims for unemployment benefits moved higher in recent weeks, but it may be too soon to call for a cycle bottom, although that may be a possibility.
Employment growth continues at a "strong" pace, according to the consensus of economists.
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The unemployment rate is at an extremely low level and is still trending downward.
Hourly earnings grew 3.1% year-over-year. Some economists worry that faster wage growth could lead to rising inflation, tighter Fed monetary policy, and further increases in interest rates.
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There's no way to avert the next financial crisis, and there's no telling when the next calamity will strike, according to Timothy Geithner, the former New York Fed chairman and Obama administration Treasury secretary. "There's no way to anticipate the full range of things that can cause a system to break down. It's good to worry about all the potential sources of shock, but you must be humble and skeptical about the ability of people to identify, and therefore, preemptively defuse those things." Congress has stripped away necessary tools to halt another panic, tools used in 2008-2009 by the Fed, Treasury and the Federal Deposit Insurance Corp. Those changes included barring the FDIC from providing emergency support as it had during the 2008 crisis, placing limits on the Fed's emergency lending powers, and ending Treasury's ability to backstop money market funds. Those changes raise the risk that the economy will have to be teetering on the brink of collapse before Congress is willing to provide tools regulators need to abate the panic. We are choosing to run a system that creates this risk at some point in the future, Mr. Geithner warned on 9/12/2018. Governing authorities cannot protect you from the next financial crisis. According to Federal Reserve Bank of New York President William Dudley, U.S. policy makers are “a long way” from being able to identify developing risks to financial stability and act in time to prevent future crises. “We may not be able to anticipate the next area of excess.” Adam Posen, president of the Peterson Institute for International Economics in Washington, contends that the U.S. institutional framework for preventing crises is “likely to fail.” Posen said discretion within individual financial institutions was “huge,” forming a “recipe for creating uncertainty.” Posen is skeptical of the council of financial regulators created by the Dodd-Frank Act of 2010, known as the Financial Stability Oversight Council, which he calls “a mess”, due to Washington’s difficulties in coordinating between multiple agencies. The shaky global economic recovery and the threat of extreme market volatility leave the world's central banks with little or no margin for error, Bank of England Governor Mark Carney said at a joint meeting of the International Monetary Fund and the World Bank. "This is a pretty unforgiving environment" and "not a type of economy in which one can make mistakes," he said. The world is faced with "massive" challenges, according to IMF Managing Director Christine Lagarde. Low productivity, ageing populations, and the effects of the global financial crisis dampen prospects for future economic growth. Rising interest rates in the United States and an economic slowdown in China are contributing to uncertainty and a higher risk of economic vulnerability worldwide. The financial sectors in many countries are weak. Rising interest rates contribute to higher financing costs for some borrowers, including those in emerging and developing markets, thereby lessening their ability to absorb shocks. Emerging market companies with debt in U.S. dollars and revenue in sinking local currencies could struggle as the U.S. Federal Reserve Board raises interest rate increases. Rising U.S. interest rates and a stronger dollar could lead to companies defaulting on their payments, and that could "infect" banks and states. When the authorities, who almost always express optimism in order to bolster public confidence, admit to this much concern, it should be taken for what it obviously is, a clear warning.
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"We are in danger of sleepwalking into a future crisis," according to Gordon Brown, former U.K. Prime Minister, 2007-2010. "There is going to have to be a severe awakening to the escalation of risks, but we are in a leaderless world. We are at the latter end of the economic cycle where people take greater risks. In the next crisis a breakdown of trust in the financial sector would be mirrored by breakdown in trust between governments. There wouldn’t be the same willingness to cooperate but rather a tendency to blame each other for what’s gone wrong. Problems that are global as well as national and local are not being addressed. Countries are at war with each other on trade, climate change and nuclear proliferation." The global economy is now moving into a "decade of vulnerability." The ability for global central banks to drop interest rates is not as readily possible today as it was a decade ago [in 2008], while finance ministries would also have difficulty injecting fiscal stimulus. "The imbalances that plagued the world economy before 2008, are even larger now. Debt in the world economy is considerably higher and the extended use unorthodox policies of the central banks have created a platform for speculation of an unprecedented scale," according to Helsinki economist Tuomas Malinen, PhD, of GnS Economics. See: http://gnseconomics.com/en_US/2018/09/14/10-years-from-lehman-and-nothing-has-been-fixed/ The global debt load surges higher and higher, adding to risks to the global financial system. In the next recession, overextended borrowers (whose numbers are large and growing) may be unable to pay on their loans, and debt defaults could mushroom, leading to general systemic financial distress. The total of all forms of U.S. debt, including government debt, business debt, mortgage debt, and consumer debt, is now more than $59 trillion. The great majority of this debt has accumulated in recent decades--and at an accelerating pace--with the exception of the financial crisis of 2008, when lenders were afraid to lend. This unsustainable growth in debt has blown the greatest debt bubble of all time and has put the economy and financial system at risk. And it is not just the U.S.: global debt held by households, governments, and financial and nonfinancial corporations soared by more than $79 trillion over the past decade to a record $237 trillion, which is 382% of global gross domestic product, according to data released by the Institute of International Finance in its report dated 10/24/2017. In addition, the number of "stressed" firms that can't cover their interest expense has been rising. When people, corporations, and governments spend more than they earn, debt grows faster than the economy, and the mountain of debt keeps rising higher and higher. When the next recession arrives (and sooner or later there is always another recession), incomes decline and rising numbers of borrowers no longer will be able to make payments on their debts. Loan defaults will cause rising numbers of lenders to be shown to be insolvent, interconnected financial intuitions may fail in a chain reaction, and the global financial system may freeze up again, like it did in 2008. It could be like deja vu all over again, or worse, because the debt load is much larger now.
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Stay safe. Thanks to decades of fiscal and monetary malpractice leading to excessive spending, speculation, and misallocation of economic resources, the global financial system has been loaded up with excessive debt, leverage, bad "assets", and hidden insolvency. U.S. cities (Detroit, Stockton) and sovereign nations (Greece, Cyprus, Argentina) have had to admit they are bankrupt and can't pay their debts--and there appear to be other major entities that are trying to cover up their financial weakness. Although central banks print trillions of units of fiat currency (which they pass off as "money"), out of thin air and backed by nothing at all, in an effort to keep the global financial system from collapsing, their inflation of the currencies not only has not fixed the underlying problems, but actually exacerbated the imbalances in the real global economy and, thereby, escalated risks. Debasing the currency is only the first step, which then can be followed by suspending pension payments, imposing capital controls, raising taxes, and bailing in banks by seizing part or all of customers' bank deposits. Now is the time to take action. The great majority of investors remain optimistic, but that is only an extrapolation of past performance, and it is no guarantee of rising stock prices going forward. On the contrary, excessive optimism is often a sign that the top is near. Place your assets under our careful management--before the next episode in the ongoing world financial crises hits most portfolios. Make no mistake, the ongoing global economic and financial crisis has not been fixed by any sound or lasting solution. And history shows that governing authorities cannot protect you or give you any advance warning--but we will. Given the known serious and stubborn economic and financial troubles that defy solutions and create major risks for the outlook ahead, we offer a risk-averse strategy for clients' accounts we manage. Our Safety-First program, which emphasizes absolute return on capital with low risk of major capital loss, could prove most beneficial to your net worth in the year ahead. To learn more about our proprietary Safety-First Portfolio, click here. If you want to participate in the stock market during the good times, and then automatically shift away from stocks when stock prices are trending down, we have a program for that too: our proprietary Dynamic Allocation Shifting Strategy, click here. If you agree that making money while staying safe is better than taking uncontrolled risks in the stock market and exposing your nest egg to potentially ruinous losses, we would be very happy to implement our time-tested strategies for all of your assets. It makes good sense to choose protection--especially at this time when the financial world is stretched out of proportion. We are always happy to discuss your goals and concerns and answer all your questions. Call us now for a free consultation. Please contact Bill Anderson by phone: 646-652-6879, or by email: [email protected]
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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Defining Multiple Time Frames For Classifying Trends It is important to understand that markets often display very different and conflicting trends, depending on the specific time period analyzed. Nearly a century ago, the Dow Theory established a useful way to organize time/trend information. In harmony with the Dow Theory, we organize our analysis into 4 different time frames, as follows: Intraday and 2-day trends: these movements are too small and random to comment on here. Daily price "jiggles" cannot be usefully analyzed in a weekly analytical report because they change too frequently. Only the very few professional traders constantly glued to their computers are able to capitalize on the fastest moves. Ignore these price movements. Short-term trend: lasts a few days up to 2-3 weeks, and occasionally a little more. Short-term price trends also change frequently, often in reaction to the latest news and rumors, and so they are fickle and unreliable. The Dow Theory views short-term minor "Ripples" as "insignificant noise." Although skillful traders may be able to profit from short-term price movements, most investors cannot. Investors can take advantage of minor moves by trading in the opposite direction to the short-term trend, buying on price weakness and selling on price strength. Medium-term trend: lasts 3 weeks to 3 months, and occasionally up to 8 months in a prolonged trading pattern. It is also known as the intermediate or secondary trend, and it is often a consolidation or correction phase within and opposite to the direction of the long-term trend. The medium-term trend can move price from several percentage points up to nearly 20%. It is very significant to swing traders, and it can be important to investors. Long-term trend: lasts from a few months to a few years, and occasionally even longer. The long-term trend is also known as the primary, dominant, main, and major trend. Prices can move 20%, 30%, 50%, or more. The long-term trend is highly significant for all traders and investors. We always trade in the direction of the long-term trend, buying long in bull markets and selling long or selling short in bear markets, because that puts the probability of making money in our favor. Trading opposite to the long-term trend, that is, buying long in a bear market or selling short in a bull market, would put the odds against us and can lead to disastrous losses. All traders and investors can profit by trading in the same direction as the most important long-term trend. Relative Strength: Both academic studies and long experience show that probabilities favor buying the strongest trading instruments/investments and avoiding the weak and lagging ones. Although nothing in the markets works every time, buying and holding the strongest instruments has produced above-average returns most years and is one of the very best methods for selecting specific regions, countries, sectors, industries, stocks, bonds, tangible assets, etc. in which to invest. Investor Sentiment is used for counter-trend trading. When there is a great majority of bulls, rallies suddenly can fizzle and reverse. Conversely, when there is a majority of bears, short-squeeze rallies suddenly can appear, seemingly out of nowhere. Moderate sentiment tends to coincide with uncertain, indecisive markets. Note that sentiment extremes are often early, and momentum can sustain a trend in motion beyond sentiment extremes.
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.
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The information in this report is intended for sophisticated traders and investors who understand the risks of trading in the financial markets. The information and data herein are based on sources available to the public. The contents are not investment advice. Written reports cannot substitute for full-time professional investment management. No representation is made that this information is reliable, accurate, complete or current. No representation is made that any regulatory authority has passed on the merits, adequacy or accuracy of this information. Nothing herein should be interpreted as any kind of offer, solicitation, commitment, promise, warranty, or guarantee whatsoever relating to any of the contents of these pages. INFORMATION PROVIDED IN THIS DOCUMENT IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED. The author of this report, as well as affiliated persons and companies, are not responsible for any investment decision and accept no liability for any loss arising from the use of information contained in this report. The reader assumes the entire risk of any use whatsoever of this information. Robert W. Colby Asset Management, Inc. (Colby) hereby certifies that the views expressed in this research report accurately reflect the personal views of the Company’s Chief Investment Officer, Robert W. Colby, CMT, and/or other trained members of Colby, about any and all of the subject markets or securities, and further certifies that no part of the compensation of Colby was, is, or will be directly or indirectly related to the recommendations or views in this report. Colby is engaged in investment management as well as the conduct and publication of professional-quality, independent technical analysis research and, as a matter of policy, always makes best efforts to be as objective and unbiased as possible. Any and all statements referring to Robert W. Colby Asset Management, Inc., performance are intended to be accurate and complete and to disclose all material facts necessary to avoid any unwarranted inference. Any and all investment performance data shown reflect all accounts in our recommended investment program. (Some clients, at their own choosing, may hold securities that are not included in our recommended investment program, or they may choose to deviate from our program in some other way; therefore, their performance results may deviate from our recommended investment program, for better or worse, and are not included in our performance data.) Our performance data reflects the deduction of advisory fees, brokerage or other commissions and fees, and any other expenses that accounts have actually paid. Our performance data reflects the reinvestment of dividends, interest, and other earnings. Our investment strategies and all fees are explained on our website and in our disclosure documents and also are available on request. The industry standard benchmark for performance comparison is generally the S&P 500 Index, although that and all other price indexes have certain limitations in that they differ from our recommended investment program in volatility, asset mix, diversification/concentration, dividends, interest, trading costs, fees, and other factors. Unlike the S&P 500 Index, which passively reflects the price performance of 500 large-capitalization stocks, our recommended investment program is concentrated in relatively few securities and actively aims first for capital preservation and second for capital appreciation. We work continuously to achieve these goals. We try to anticipate and adapt to change. Regulators point out that there can never be any guarantees in investing; there is always risk and the possibility of loss; changing market conditions are beyond anyone's control; and past performance is not a guide to future performance.
Colby Global Markets Report A Publication of Robert W. Colby Asset Management, Inc.