An Upside Trigger for Stocks may be Approaching

If stocks continue to rally they won’t have to move much higher to trigger a signal for my Adaptive Growth strategy.  This is a strategy that uses a timing base mechanism to determine whether the strategy should own stocks or cash.

Here is a picture of the current state of the trigger.

StockTrigger22616

If he black line moves above the blue line it is usually a good indication stocks are about to resume a long-term uptrend.  There is always a chance during a transition period (where lines have recently crossed) the indicator will reverse course after crossing . We saw that happen back in the fall.  The first dip below the blue line was based on the mid-summer selloff.  The August Flash-Crash sent the black line much lower but stocks quickly recovered for a short time only to fall below it again at the end of 2015.  Aside from the reverses that can happen around an initial trigger this has been a very reliable indicator for both avoiding sustained declines and staying invested during more mild corrections.

Here is what the indicator looked like back in 2007-08.

StockTrigger2007-09

I have to apply a bit of discernment when a trigger arrives.  Currently this recovery rally is not all that convincing so I am willing to be a little patient if the black line does move above the blue line in the near future.  Even getting back into the market a couple points past where the lines cross I should be able to enter below the highs back in mid-2015 if the current uptrend continues its course.

Past Commentary

Due to an abrupt service change by my website hosting company, I had to move my website and blog during the month of February.  The website transition went very smoothly but porting over years of blog posts is a different matter altogether.  Although I have provided a lot of market and investment commentary over the years I have decide that I am going to start a new blog and not bring over the old content.  I have access to the old content and at some point I might change my mind and decide to bring some over but at this point there is no plan to do so.

Welcome To Market Insights

The purpose of Market Insights is for Dightman Capital to be able to share more information about the state of investment markets through the results of various portfolio strategies.  We hope this will introduce some helpful concepts around investment growth and risk management.

Occasionally we might dig into the “why”, but most of the time we will be content to deliver the what.  As in, what is the current state of different investment strategies and what part of the investment mix can be attributed to current performance.

The biggest point we hope to drive hope is, a traditional mix of stocks and bonds may only be appropriate for part of an investors portfolio.  Incorporating a simple timing based system along with a unique mix of traditional stocks and bonds may provide a more complete solution for those investors looking for potentially superior risk adjusted returns.