Top Advisors Corner

Tom McClellan: Will Labor Shortage Kill Housing Boom?

We know by the message from lumber prices that the next 12 months should be a positive period for all sorts of housing related data.  New home sales, for example, tends to follow in the footsteps of lumber price movements with a lag time of about 1 year.  So because lumber prices have been trending strongly higher, that should mean higher numbers of new home sales.

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David Keller: Why Does a Down Day Feel So Bad?

In an extended bull market with very few painful corrections, why does one down day feel so downright dreadful?  The answer is “myopic loss aversion” which was proposed in the early 1990’s by Bernartzi and Thaler.  To summarize, we feel the agony of losses much more than the joy of gains.  Also, the more you pay attention to your portfolio, the more you will tend to fall victim to this bias.  Let’s examine both of these issues for investors.

The Overwhelming Pain of Losses

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Mary Ellen McGonagle: Using The Vix And Other Technical Indicators To Time The Markets

The S&P 500 had its largest drop in price in 8 months yesterday as investors dumped shares on the possibility that President Trump had blocked justice by allegedly asking for the end to an FBI investigation on former cabinet member Flynn. If found to be true, this offense is considered impeachable.  The fact that this Index broke its 50 day moving average on volume is not a good sign. While the longer-term uptrend for the markets remains, we would refrain from adding new positions until the index breaks back above this key 50 day moving average.

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Mark S. Young: Wall Street Sentiment-- The End of the World As We Know It?

In our last submission, we noted that our Wall Street Sentiment Survey data was showing the Surveyees leaning heavily Bearish, implying that the market was very likely to fall immediately, BUT then immediately reverse right after the immediate weakness. That pattern played out well. Our take away overall was that the heavy Bearish lean was indicative of entirely too much Bearishness with the S&P but a spit away from all-time-highs. We were right and the market rallied 150 points higher. 

Now, the market is in a very different place.

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David Keller: Cap Tiers and Current Bars

In going through my regular routine of macro indexes and breadth charts, I started to see some things that tend to happen before a correction.  These three things range from the statistical to the anecdotal, but combining the three raises some concern.

Three things that suggest a correction may be imminent

1) I noticed the divergence of small and mid caps from large caps in the US.  I mentioned this in my blog yesterday and the chart below shows the divergence pretty well. 

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David Keller: Sell In May? Not Today

This time of year, there is no escaping discussion of the “Sell in May and Go Away” phenomenon.  That is, the idea that equity markets tend to be seasonally weak in the May-October period, then stronger in the November-April period.  You can find more on the history of the phenomenon here.

Here are three things to keep in mind as you consider the “Sell in May” concept:

Even if everyone knows about it, it could still work.

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