The January Effect

According to the model from 1928 to 2012, if the DJIA can end the week/month positive (above 17,823) and the S&P 500 above 2058, the average annual return for stocks should @10.9%, the consensus opinion!! Markets were up 78% of the time. Failing that, even a down jones could end the year up 2.8%, about 50% of the time.

According to the above chart (my latest technological breakthough) although we seem to be in a deflationary spiral - locally as well as globally- the 2-year Treasury rate has risen steadily for the last 12 months. The TIPs ETF at the bottom of my grid (below) has also been rising, but well off the 2012 highs.  

Even the Patriots balls seem to be in deflation!

In another great article from Barron's by Steve Sears, the Option guy, he posits that 2015 will bring flat Volatility in the SPX, but a higher one in the VIX. This bodes well for the return of my DITM (Deep-In-The-Money) covered call strategy that did well before the Fed markets kicked in, lowering the premium in call options - hence the lower returns. Although the strategy has the benefit of hedging (selling a call lower than buying the stock), if it really drops, it can erase much of the lesser gains of successful DITM trades. As they say, (Fed) stocks ride the Escalator up but take the Elevator down!!

The stunning Sentiment Indicator last week was the sharp, record-breaking rise of Commercial shorts in Gold, even though it has been climbing lately, above $1300. I would hope that eventually it would cause short covering/buying. On the contrary, CEO Insider Selling (by Sector), and other Insiders, have not shown the madness of the prior year. They dropped from 73 to 1 two weeks ago, down to 18:1. Finally, the AAII Bull/Bear survey moved quite a bit to the middle again (Bullish FOR the markets)

Here are the numbers:

  

Date>		1/23/2015	1/16/2015
Indices:	DJIA	17672	17511
	NAZ	4757	4634
	SPX	2051	2019
WklyVolume (Bshs).	naz/ny….	7.3/3.3	9.9/4.4
Specul.Ratio hi=bullish		2.21	2.25
Sentiment:	put/call-CBOE	62	70
VIX>50-alltmlow=8.8		16.7	20.9
Advance/Dec-NYSE..		2083/1152	1448/1796
Weekly Net:		931	-348
Cumulative:		165001	164070
Weekly	NYSE hi/low…	516/165	479/339
New Hi's/Low's	Nasdaq h/l	174/243	207/294
McClellan	Oscillator	16	-2
McClellanSum	.+750/-1000	257	227
Newsletter	Inv.Intel -Bull:tues	49	48
Surveys	Bear:-5yrs	17.4	16.3
	AAII  -Bull :wed.	37.1	46.1
	Bear	30.8	21.5
COT:SPX w/w	large/small (net)k	4k/12k	1k/19k
COT:gold  comm.hedg	long-short.000	(178k)	(138k)
CEOinsider	selling	.18:1	.25:1
off.&bd b/s.vs.	10% holder b/s	.160:30	160:20
3-box rev	Bullish%-	64	62
US equity -ICI	Fund Flows	WeekDelay	0
MMF flows	Change in $B	(1.0B)	(9.0B)
MargDebt- top (300M)	monthly
ETF:mthlyEqty/	Int'l/Bond-$B
2-yr Tsy Yield: Inflation		0.49%	0.49%
TIP (ETF)	Inflation	114.17	113.8

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance

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The January Effect

January FX

Named after JANUS, the two-faced God, January is fraught with Volatility - mostly to the downside. The January effect, usually a rebound from the Xmas rally and year end position squaring, is said to predict the rest of the year. I hope not (so far). Making lows for the third week after the 18,000 record @ Xmas, the DJIA does not bode well for January. Low energy may be helpful for Joe Sixpack, but for the S&P companies, 1/3 of CapEx comes from it. I'll be watching the January model annually from 1928 as the year progresses. A negative January declines for 6 months, only to rebound a bit into year end.

Dr. Copper, supposedly the Economic indicator, hit a five- year low, and retail sales are down for December. With the U S being the best house in a bad block, our dollar should only get stronger as global rates get lower. Money should continue to flood into our markets for safety and yield.

Looking at the table below, Volume has again resumed its normal range, but breadth is beginning to weaken (Advance/Declines, New Highs/Lows); newsletter surveys (taken midweek) are benign, as is Insider Selling by sector and Officers/Board members, for this time of year. EXCEPT for Gold - which was huge last week, just as gold was rising - could short-covering be far behind?
Finally, managed mutual funds saw $$ losses for the 9th year in a row, as people move to Index funds to avoid high fees and poor performance ( 80% underperforming the Indices!).

Just as with Barron's (my weekly read) which is losing a couple good columnists, I am severing relations with Examiner.com after two years, and will concentrate factoids in this column, as well as the DITM blog. http://ditmcalls.blogspot.com. With the VIX now almost doubling year over year to the 20s, the volatility of call options are great for both the DITM strategy as well as Leap Strangles, as these calls now have more juice in them to sell, bringing in more $$ as well as providing more safety - which is a plus these days.

Here are last week's numbers:

Date>		1/9/2015	1/2/2015
Indices:	DJIA	17737	17833
	NAZ	4704	4726
	SPX	2044	2058
WklyVolume (Bshs).	naz/ny….	9.6/4.1	5.4/2.4
Specul.Ratio hi=bullish		2.34	2.25
Sentiment:	put/call-CBOE	65	66
VIX>50-alltmlow=8.8		17.5	17.8
Advance/Dec-NYSE..		1512/1748	1355/1893
Weekly Net:		-236	-538
Cumulative:		164418	164654
Weekly	NYSE hi/low…	413/202	413/86
New Hi's/Low's	Nasdaq h/l	196/159	287/116
McClellan	Oscillator	0	6
McClellanSum	.+750/-1000	323	376
Newsletter	Inv.Intel -Bull:tues	50.5	56.4
Surveys	Bear:-5yrs	15.2	14.9
	AAII  -Bull :wed.	41	51.7
	Bear	27.7	19.3
COT:SPX w/w	large/small (net)k	(1k)/25k	7K/21K
COT:gold  comm.hedg	long-short.000	(123k)	(105K)
CEOinsider	selling	.73:1	.17:1
off.&bd b/s.vs.	10% holder b/s	.160:30	160:20
3-box rev	Bullish%-	70	68
US equity -ICI	Fund Flows	WeekDelay	(.4B)
MMF flows	Change in $B	(18.6B)	19.4B
MargDebt- top (300M)	monthly	NOV	457B
ETF:mthlyEqty/	Int'l/Bond-$B	NOV	1221/434/296
2-yr Tsy Yield: Inflation		0.56%	0.68%
TIP (ETF)	Inflation	113.08	112.73

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance

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January FX

Exchanging Funds

According to Barron's last week, this iis the 9th year that funds have flowed from Mutual Funds to Index and ETFs (Exchange Traded Funds) as most managed funds fail to even equal their benchmarks - which contain all stocks in that category - good and bad. A study shows that the higher the U.S interest rates, the higher the "Alpha" - which is the gain over and above the benchmarks (Beta). So despite being a contrarian, against the crowd, it appears that this is still the best and easiest way to invest.

The Commitment of Traders (COT) shows a departure from smart money and "dumb" (small traders) with large going negative, versus small up 25k. Also , it shows commercial gold shorters still very high, although it seems to be rising recently into the 12-handle.

Here are the numbers:

Date>		1/9/2015	1/2/2015
Indices:	DJIA	17737	17833
	NAZ	4704	4726
	SPX	2044	2058
WklyVolume (Bshs).	naz/ny….	9.6/4.1	5.4/2.4
Specul.Ratio hi=bullish		2.34	2.25
Sentiment:	put/call-CBOE	65	66
VIX>50-alltmlow=8.8		17.5	17.8
Advance/Dec-NYSE..		1512/1748	1355/1893
Weekly Net:		-236	-538
Cumulative:		164418	164654
Weekly	NYSE hi/low…	413/202	413/86
New Hi's/Low's	Nasdaq h/l	196/159	287/116
McClellan	Oscillator	0	6
McClellanSum	.+750/-1000	323	376
Newsletter	Inv.Intel -Bull:tues	50.5	56.4
Surveys	Bear:-5yrs	15.2	14.9
	AAII  -Bull :wed.	41	51.7
	Bear	27.7	19.3
COT:SPX w/w	large/small (net)k	(1k)/25k	7K/21K
COT:gold  comm.hedg	long-short.000	(123k)	(105K)
CEOinsider	selling	.73:1	.17:1
off.&bd b/s.vs.	10% holder b/s	.160:30	160:20
3-box rev	Bullish%-	70	68
US equity -ICI	Fund Flows	WeekDelay	(.4B)
MMF flows	Change in $B	(18.6B)	19.4B
MargDebt- top (300M)	monthly	NOV	457B
ETF:mthlyEqty/	Int'l/Bond-$B	NOV	1221/434/296
2-yr Tsy Yield: Inflation		0.56%	0.68%
TIP (ETF)	Inflation	113.08	112.73

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance

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Exchanging Funds

Cinco de Anno

According to my Research there has Never been a down year in the 5th year of the Decennial (10-year) cycle for the DJIA. Other cycles (4-year Pres., 6-month complementary, etc.) also indicate a positive year, despite today's debacle and the 5-year Bull market.

Last week saw a rare decline in Advance/Decline stocks in the NYSE; Volume was slightly better than the previous Holiday week, which was the weakest of the year. Funnily enough, Insider trading, for the year end, was very mild - both buying and selling. Gold, however, remains heavily shorted - an harbinger of bad tidings for the intermediate future, with a strong U S, and US Dollar.
Here are last week's numbers:

Date>		1/2/2015	12/26/2014
Indices:	DJIA	17833	18053
	NAZ	4726	4806
	SPX	2058	2088
WklyVolume (Bshs).	naz/ny….	5.4/2.4	4.9/2.3
Specul.Ratio hi=bullish		2.25	2.13
Sentiment:	put/call-CBOE	66	53
VIX>50-alltmlow=8.8		17.8	14.5
Advance/Dec-NYSE..		1355/1893	2153/1068
Weekly Net:		-538	1085
Cumulative:		164654	165192
Weekly	NYSE hi/low…	413/86	478/72
New Hi's/Low's	Nasdaq h/l	287/116	317/124
McClellan	Oscillator	6	36
McClellanSum	.+750/-1000	376	306
Newsletter	Inv.Intel -Bull:tues	56.4	52.5
Surveys	Bear:-5yrs	14.9	15.8
	AAII  -Bull :wed.	51.7	50.9
	Bear	19.3	18.9
COT:SPX w/w	large/small (net)k	7K/21K	n/a
COT:gold  comm.hedg	long-short.000	(105K)	n/a
CEOinsider	selling	.17:1	31:1
off.&bd b/s.vs.	10% holder b/s	160:20	160:20
3-box rev	Bullish%-	68	75
US equity -ICI	Fund Flows	WeekDelay	(1.1B)
MMF flows	Change in $B	19.4B	20.5B
MargDebt- top (300M)	monthly	457B
ETF:mthlyEqty/	Int'l/Bond-$B	1221/434/296
2-yr Tsy Yield: Inflation		0.68%	0.74%
TIP (ETF)	Inflation	112.73

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance

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Cinco de Anno