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July 31, 2007:

After nine months since our last signal, our trend following system has generated sell signals on SPY and QQQQ. We are therefore reducing the US market exposure to 50%.

October 18, 2006:

Our trend following system has generated a Buy Signal on Russel 2000 index (see the chart below). This was the last of the US indices that we follow to show a Buy Signal. Even though the current rally looks like extended and a correction is due, we would like to follow our timing system mechanically. Of course, our timing methodology is open to improvements as we get more data on how it functions. However, we believe that the key to long term success of any market timing model is to follow it with discipline even when it seems "wrong".

October 3, 2006:

We have been under-invested in US equities primarily because of weakness in small and mid-cap indices. The small and mid-cap indices are now showing signs of strength. Also, the Dow is flirting with all time highs; and if it closes at an all time high today, it may give a psychological boost for the market and bring in more buying. Moreover, as we wrote before, October to May has been a seasonally strong period. Therefore, we are increasing the US market exposure.

August 19, 2006:

Despite the recent run up in the market, we think that the intermediate term trend of the US market remains sideways. However, the headline indices, namely, S&P500 and DJIA have broken their downtrend. The technology and small cap indices (e.g., QQQQ and IWM) continue to be in downtrend based on our system. Since we mechanically follow the market, we are cautiously adding long positions in the US equities.

June 23, 2006:

All the US major market indices are now in confirmed down-trend. In fact, the selling pressure has been so strong that the counter-trend rallies have been very weak or non-existent. The market trend may change next week, next month, or next year -- no one can know for sure prior to it occurring. We will wait till the trend change is apparent based on our indicators and then get back into the market.

May 31, 2006:

All the major US indices are now in down trend. The short-term bounce that we were expecting from the rapid drop in the market has failed to materialize so far. Therefore, we are using today's upmarket to reduce the equity exposure further. Short term interest rates are now in the neighborhood of 5%, therefore, we are content to stay in cash rather than take risk in the US equity markets at this time. Along with the May-Oct seasonality that we indicated before, another seasonality that is likely to work against the market is the US elections cycle seasonality as shown in the chart below (chart courtesy of seasonalcharts.com).

May 12, 2006:

Reduced US market exposure:
Equities: 40%  and Cash: 60%

The precipitous drop in the stock market during the last two days has triggered a sell signal on QQQQ.   We may get a short term bounce next week, but we are entering a seasonally weak period for US Stocks.  As shown in the chart below (Source: seasonalcharts.com), May-October has been a relatively weak period for US stocks.  Given the current technical and fundamental conditions along with the seasonality expectations, we plan to exit US equity positions during the next week or so.

May 3, 2006:

Increased US market exposure:
Equities: 60%  and Cash: 40%

The resiliency of the US stock market is very impressive.  Higher commodity prices including those of the oil and gold seem to have little effect on the stock market.  Last two months have seen continued upward progress of DJIA and S&P500.  NASDAQ has been somewhat weak, but has not generated a sell signal yet on our system.  Based on seasonality, "Sell In May and Go Away" saying worked well in the past, and it might still be true this year.  For now, however, the strength in the market coupled with low bullishness readings (see Investors Intelligence 'II' chart) keep us partially invested in the US market.  We continue to hold Gold, Oil, and emerging market positions.  The availability of ETFs such as GLD, USO, IGE as well as open ended mutual funds such as FSTEX have made investing in commodities easier for individual investors.  In our opinion, given the continued monitory inflation as well supply and demand imbalances, commodities will continue to do well.

Our past market commentary and timing signals are available here.