GaveKal Capital’s Steve Vannelli outlines the academic foundations, philosophy and process behind the GaveKal Knowledge Leaders Strategy.
Read MoreOn an equal weighted basis, the MSCI World index is up 2.58% YTD, is down 3.39% QTD and down 3.01% MTD. The equal weight index gives us a better idea of our chances of picking stocks that outperform. Performance of MSCI World Sectors Next let’s delve a little deeper in the internals of the market
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One of our favorite market breadth indicators measures the percent of stocks in an index that are in a bear market, which we define as down at least 20% from their 200-day high (blue line, left axis, inverted in the charts below).
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The CBOE Skew Index made a 15-year, 11-month high last Friday and the 25-day moving average is on the rise again. The latest reading puts the risk-adjusted probability of a 2 standard deviation event happening in the next 30-days at 11.75%-13.10% and a 3 standard deviation event at 2.21%-2.51% for the S&P 500.
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The MSCI All Country World Index (ACWI) is a comprised of two basic pieces: the MSCI World (Developed) Index, which contains about 1,600 companies and the MSCI Emerging Markets Index, which contains about 850 companies. The MSCI ACWI is a good global reference point for measuring relative performance trends.
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Copper, after having been turned down by the falling trendline last week, is breaking down through the upward sloping support line today. The technical pattern formed in copper is known as an ascending triangle pattern, and breaking below the rising support line is generally taken as a bearish signal.
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One of the ways we measure volatility in the stock market is to calculate the average realized volatility for constituents in various indexes. It’s no secrete that volatility has been muted pretty much everywhere, with the emerging markets being no exception.
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For the last five years, early cyclicals have been the best performing group in the emerging markets as abundant credit flowed into these markets. In the chart below, we show an equal-weighted basket of EM early cyclicals (consumer discretionary stocks).
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Looking over our charts and data, there are a few areas that seem like decent ways to play a mean reversion trade. Over the last 100 days, many large European countries have experienced large technical corrections.
Read MoreNew 65-day lows in stocks are picking up across emerging markets. We’ve written a few times over the last week here and here about how the strong USD might affect emerging market company prospects to their detriment, so seeing a pickup in stocks making new intermediate term lows is not all that surprising.
Read MoreThe ICSC-UBS/Goldman retail chain same-store sales is a useful weekly indicator of general merchandise spending which accounts for roughly 10% of the US retail market. Because it is a weekly data point, this series can look noisy.
Read MoreOver the last decade there has been a pretty decent relationship between the value of the Japanese Yen and the shape of the US Treasury yield curve.
Read MoreThe Boom-Bust Barometer (CRB raw industrial index divided by jobless claims) made a high on July 16th. It has subsequently fallen to two month lows as the S&P 500 began to rally in mid-August. If the US dollar continues to rally, this may hold back commodity prices and thus, hold back the Boom-Bust Barometer.
Read MoreIndustrial production in the US came in below expectations for the month of August (-0.1% vs consensus estimate of 0.3%) and Capacity Utilization fell to a six month low . Meanwhile, the Empire State Manufacturing Survey surged past expectations for the September (27.5 vs consensus estimate of 15.9).
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The simplest way we know of to measure whether an index is overbought or oversold is to calculate the percent of stocks in the index that are trading above their own 200-day moving average.
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