Money Flow for May Week 2

Further to my last Weekly Market Update and its subsequent Addendum, this week's update will look at:

• 6 Major Indices
• 9 Major Sectors
• Number of Stocks Above 20/50/200-Day Moving Averages
• Various World Markets
• N.B. Please click this link to see my Addendum post to this one for further Weekly analysis
  

Money Flow for May Week 1

Further to my last Weekly Market Update and its subsequent Addendum, this week's update will look at:

• 6 Major Indices
• 9 Major Sectors
• SPX:VIX Ratio
• Hypothetical Portfolio
• Copper
• Lumber
• Homebuilders ETF
• Emerging Markets ETF
• 30-Year Bonds
• Various World Markets (*N.B. These will be covered in a separate Addendum post because of space concerns in this post...please check my Blog at this link to see that one)

4-Day Performance of Hypothetical Portfolio (April 29-May 2)

Further to my recent post wherein I introduced a hypothetical portfolio of indices, ETFs, and the 30-Year Bond (in order to broadly track "value" vs. "growth" sentiment), I would offer the following graph which depicts the percentages gained/lost so far this week (as of Thursday's close).

Market participants favoured the Technology sector, followed by Emerging Markets, Cyclicals, Large-caps, Commodities, Small-caps, and Financials. Homebuilders has been flat and some profits have been taken in the Health Care Sector. Some money was then allocated into 30-Year Bonds.

While there was a blip in volatility on Wednesday, the VIX dropped back below 14.00 on Thursday.

We can see that markets have been willing to add a fair bit of "risk." While volatility remains low, I'd suggest that we'll see the markets continue to buy into the "growth" sectors, along with "value" until this sentiment changes.

This weekend's market update will look at a broader flow of money for the entire week, so be sure to check back for that post.

The following Year-to-date graph shows that, up until now, markets have favoured a fairly "value-oriented" approach (sprinkled with some "growth" segments)...Commodities and Emerging Markets are in negative territory. We'll see if the buying (as has begun this week) picks up in those areas any time soon. If so, we may also see more money flowing into Bonds as a safety net...in that case, we may see a slow, choppy advance in the general markets as participants rotate into and out of various segments in order to fund further purchases. Otherwise, if we see large-scale draw-downs in Bonds, we may see a much more rapid advance in Commodities and Equities.

"Risk-off" May Day

Further to my last post, this update shows that money flow, as of 10:30 am today (Wednesday), has been out of equities and commodities and into 30-Year Bonds, as shown on the graph below.

We'll see if that holds, worsens, or reverses after the release of the Fed meeting rate announcement and press statement today at 2:00 pm EST.

There's been a slight uptick in volatility today, as shown on the Daily chart of the VIX below. 14.00 seems to be a popular resistance/support level recently, so we'll see if it holds above (where it's sitting at the moment).

A "Hypothetical Canary Portfolio"

Just for fun, I thought I'd look at a few instruments to see their comparative growth during a one-year period as a broad measure of where "value" vs. "growth" sentiment currently is in a so-called "balanced portfolio." There are 10 in total, since that's the number I'm limited to showing on one graph.

Then, if one were so inclined, one could track the performance of this group for the rest of 2013 year to get an idea of general market trend, risk appetite, and the momentum of both.

The selections are based on the "low-growth macro-economic environment" and on the assumptions (made in my post of April 25th) that the "BUZZ WORDS" will be with us and will continue to define World Central Bank and global market activity for the rest of the year.

I, therefore, dub this a "hypothetical canary portfolio." 

As shown on the 1-year percentage gained/lost graph below, I've selected three of the Major Indices, the Commodities Index, the Financial, Health Care, and Cyclical Sectors, the Home Builder and Emerging Markets ETFs, and 30-Year Bonds. I thought such a basket could represent a good cross-section of "value vs. growth segments" and be worth monitoring. No doubt there are many other portfolio combinations, but this is the mix that I've chosen.

You can see that the Homebuilders ETF has gained the most, followed by Health Care, Financials, Cyclicals, Small-Caps, and Large-Caps. During the past year, Technology, Emerging Markets, 30-Year Bonds, and Commodities have lagged. We'll see whether traders step in any time soon to add these laggards (except Bonds) into their portfolios, thereby increasing "risk" in this projected "low-growth macro-economic environment." Whether they rotate out of the "leading value instruments" and/or Bonds in order to fund such acquisitions remains to be seen.

This portfolio is shown next in chart form, from which you get an idea of their respective trend and momentum, along with support/resistance levels.

What I notice first is that the leader, Homebuilders, has run into resistance and has yet to make a higher swing (closing) high, while the laggard, the Commodity Index, has fallen to a level of support and bounced, but has yet to make a higher swing (closing) high and is still in negative territory for the year. I would suggest that if both of these make a higher swing (closing) high in the short term, and are able to stay above these levels, we may see the others continue upwards for a period of time in a "risk-on growth-oriented" play. This would then tie in with the scenario that I've outlined recently in these three posts here, here, here. However, I would suggest that if Homebuilders and Commodities weaken and fall (and hold) below their last swing (closing) low, we may see some weakness enter in the rest of these markets, and see "risk and value" come off, and money flow into Bonds.

Time will tell which scenario we see first.