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April 25, 2016

Global Stock Markets Are Overbought
and Up Against Resistance


Preview from my weekly report*

The S&P 500 rose 0.52% to 2091.58 last week, again stimulated by talk of further easing of global central bank monetary policies and surprisingly strong crude oil prices.

The 10-week price trend for the S&P 500 remains bullish, but the 1-year trend is a giant, sideways roller coaster, Currently, the S&P 500 and other major price indexes are up against old highs, which ought to offer resistance.

Contrary thinking based on investor sentiment calls for caution at this time. The Put/Call Ratio and $VIX Volatility Index are overbought, while the latest AAII survey indicates greater complacency, with 33.41% bulls, 23.92% bears, and 42.67% neutral. Short-term traders appear to be already in. Traders are quick to reverse positions, so much of the available supply of stocks may be held in weak hands that might sell quickly at the first sign of trouble

Central banks have conditioned traders to believe that the monetary authorities will do "whatever it takes" using unproven and experimental monetary policy accommodation (which amounts to printing money out of thin air) in order to cut short any stock market tumble and prop up sluggish global economies that are on the edge of recession. It appears increasingly clear, however, that the incredible and massive monetary easing by global central banks is failing to produce the desired growth of the real global economy and failing to sustain long-term uptrends in global stock markets. All of history teaches that massively inflating the money supply and debasing the value of currencies eventually have produced undesirable outcomes.

Given sluggish economic growth, declining corporate profits, geopolitical risks, central bank interventions, oil price manipulations, and the propensity for overnight news gaps, both positive and negative, we don't see relief anytime soon from the volatile, high-risk, roller-coaster challenge for investors that has been evident since the S&P 500 peaked at 2134.72 on May 20, 2015.

There is no change to our recommendation that traders and investors should carefully manage their risk exposure and be prepared for greater volatility ahead. Risk exposures ought to be well controlled.

On Balance Volume is still showing bearish divergence compared to prices of major U.S. ETFs. As the SPY price challenged its 2015 highs, OBV continued to lag far behind, recovering a relatively small fraction of its large loss. Major divergences are evident since December, 2014, with lower highs and lower lows in OBV relative to price, as shown in the chart above. Trading volume is important because it takes rising volume to push prices up, while prices can fall of their own weight on light volume. OBV measures buying and selling pressure as a cumulative indicator that adds volume on up days and subtracts volume on down days. Traders and investors watch for divergences between OBV and price to predict possible price movements.

The percentage of stocks in the S&P 500 that are above their trailing 50-day Simple Moving Averages rolled over to its lowest level in 6 weeks and is showing bearish divergence compared to the price of the S&P 500 Index itself.

The full report offers clear and unbiased guidance on the following each week:
Global stock markets
The Defensive stock sectors
The Health Care sector
The Cyclical sectors
The Technology sector
The Financials sector
U.S. bonds and notes
Commodities (Oil, Metals, Agriculture)
Objective Quantitative Rankings for hundreds of Exchange Traded Funds

Click here for my report

Now is the time to take action. Preserve your capital by placing your assets under our careful management--before the next major bear market of -20% to -50% devastates most portfolios.

Make no mistake, the ongoing global economic and financial crisis has not been fixed by any sound or lasting solution. History shows that the authorities will not protect you or give you any advance warning--but we will.

If you agree that making money while staying safe is better than taking big 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: anderson@colbyassetmanagement.com

Robert W. Colby Can Manage Your Account

*For extensive coverage of major global markets with illustrative charts, take a free trial for my weekly report --
click here.


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11-Year Outperformance by the
Top 10 Exchange Traded Funds

Weekly Rankings of Major Trend Relative Strength

My weekly Top 10 ETFs ranked by the Major Trend Relative Strength outperformed the S&P 500 by over an 11-year period of real-time weekly tests. Click here for a graph of simulated performance.

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See The Colby Global Markets Report (click here).

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My latest book was named one of the top investment books by Stock Trader's Almanac 2005. This book also received an excellent review in the November 2003 issue of Futures.
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My ETF Rankings are not investment advice. Rather, they are an objective ongoing research study.

Analysis of market forces may offer a sense of probabilities. But the many variables that can impact market prices are notoriously difficult to predict. And, market analysis is something less than an exact science. So, sound trading tactics are always recommended. See my
Money Management Rules.

According to CFTC Rule 4.41, hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

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Robert W. Colby, CMT,
is a consultant to institutional and private investors and traders, providing regular analytical reports, custom research services, and trading systems tailored to clients' objectives. Clients include the most successful traders and investors in the world. Robert is the author of The Encyclopedia of Technical Market Indicators, Second Edition, McGraw-Hill, 2003, which has become the standard reference for indicator and trading systems design. Previously, at several large Wall Street firms, Robert worked as a proprietary trader, technical analyst, and fundamental analyst. He also was adjunct professor at New York University and New York Institute of Finance, where he developed new courses on technical analysis and market timing.

Robert W. Colby is a Chartered Market Technician (CMT), an accreditation granted to members by the Market Technicians Association (www.mta.org) after demonstrating professional competence and ethics over a period of many years. Robert has been a member of the MTA since 1980, and he strongly supports the MTA's high standards. He also supports the MTA Educational Foundation (www.mtaef.org), which works to have technical analysis included in the curriculum of major business schools. Please click the following banner for information about the Market Technicians Association. The Market Technicians Association (MTA) is the national organization of investment analysts, stock market analysis professionals, and certified market technicians in the United States.

 
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Ranking ETFs
"Robert Colby has evolved a system that, while hardly foolproof, is pretty clever," wrote Daniel Fisher, "Surfin' ETFs", Forbes, Investment Guide, Special Issue, June 4, 2007.
Please click here to view this article
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INTERVIEW of Robert W. Colby in Technical Analysis of STOCKS & COMMODITIES magazine, December 2006 issue.
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"Gold's next move: History, logic, and intermarket relationships. See if testing gold's relationship to different markets over a 32-year period provides possible trade signals for the yellow metal."
by Robert W. Colby, CMT.
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"Which gold indicators are best? Divining gold's next move."
by Robert W. Colby, CMT.
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"Applying the Relative Strength strategy to ETFs."
by Robert W. Colby, CMT.
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"PUTTING CANDLES TO THE TEST, How Profitable Are They Really?" by Robert W. Colby, CMT. Published in SFO, STOCKS, FUTURES AND OPTIONS MAGAZINE, Volume 5. No. 8. August 2006, pages 91-94. Please click here to buy this article. (Scroll to bottom of linked page.)
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TradingMarkets.com interviewed
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Active Trader magazine September 2004 interviewed Robert W. Colby. 4 pages. "Robert W. Colby: Technical collector. A discussion with Robert W. Colby about technical trading and his revised Encyclopedia of Technical Market Indicators, Second Edition. By Active Trader Staff."
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For information about
methods that would have performed substantially better than systematic trend-following in back-testing simulation dating back 32 years, email me by clicking on the following link:
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Click here for a simulated performance graph of one of my trading systems applied to a stock price index.
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MetaStock® PC Software for Technical Analysis
MetaStock® is a powerful technical analysis software program for your personal computer. It offers more than 200 built-in indicators and line studies to enable you to explore a wide variety of methods. And it empowers you to build, back test, and optimize custom trading systems to suit your own particular requirements.

Click this link to save 7%-9% on MetaStock® software
.
Or, click the banner below for a one-month free trial.

MetaStock Software