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Author: Brad Lamensdorf

Bullishness Fades but Odds Favor a Bounce

By John Del Vecchio and Brad Lamensdorf

A little dip in the markets recently has led to a marked decline in the level of Investors
Intelligence advisors’ bullishness. Bulls have dropped to 53.9% down from 56.3% the
prior week. This marks the fifth week below 60% where sentiment was pinned for most
of the fall and early winter.

Importantly, the shift in the bullish sentiment has moved toward “correction” mode as
opposed to outright bearishness.

While the level of bullishness has subsided, it’s still too high. Our own indicators
suggest that we are moving toward an outright sell signal on the market, but we are not
there yet.

Based on current readings, we expect a bounce.

Even though the level of bulls has moved off its extreme readings, it’s still too high. That
said the odds favor a short-term market move higher. Below is the short-term composite
also courtesy of Inventors Intelligence that measures dozens of technical indicators.

 

Bullishness Fades but Odds Favor a Bounce
Bullishness Fades but Odds Favor a Bounce

This composite indicator has fallen sharply in the past 10 days. Pressed nearly to the
floor, the market is due for a bounce based on this extreme move recently.

However, now is not the time to get complacent. The level of bulls will have to move
significantly lower and they will have to crawl over to the bear camp before a meaningful
bottom can be put in. Before then, there is likely to be aggressive selling and an
extreme oversold condition in the market. Then a favorable risk / reward scenario is
likely to present itself.

Active Alts uses dozens of indicators to monitor extremes and pounce on opportunities
with tremendous risk / reward ratios in the market. Book a call with Brad to learn how
these indicators can help you navigate the markets in 2021 and beyond.

 

General Disclaimer

Active Alts, Inc. (“Active Alts” or the “Manager”) is an investment adviser registered with the state of Connecticut. Active Alts manages the Active Alts SentimenTrader L/S Strategy and SentimenTrader serves as the research/index provider for the strategy. Registration with the state of Connecticut does not imply a certain level of skill or training.
The information set forth regarding securities and investment advice was obtained from sources which we believe reliable but we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities. The performance quoted above represents past performance and current performance may be lower or higher than the performance date quoted. Past performance does not guarantee future results as investment returns may vary from time to time depending upon market conditions and the composition of the strategy.

SENTIMENTRADER DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. Investors should consult their tax advisors before making investment decisions, as well as realize that past performance and results of the strategy are not a guarantee of future results. The Active Alts SentimenTrader L/S Strategy is not intended to be the primary basis for investment decisions and the usage of the strategy does not address the suitability of any particular investment for any particular investor.

The Standard & Poor’s 500 Index is provided for informational purposes only. Indices are not indicative of the strategy and may not be suitable for comparison purposes. Indices that may be shown do not reflect the deduction of advisory fees, commissions or other transaction charges.
Fees charged by the Firm are negotiable and may vary by client.

Before making an investment, you should consider your goals, objectives, time horizon and risk tolerance to be sure that this investment is suitable for you. There are no guarantees that the strategy will perform as it did in the past. You could lose money and you should not invest unless you can afford to lose some or all of your invested funds.

Calculation Disclaimer
Dividends are included in the performance results. The Manager have also calculated the net results by applying the highest management fee to be charged to advisory clients. Results will vary based on the amount of the fee applied. The results were also calculated by rebalancing the long and short portfolios on a weekly basis. The portfolio selection was and will be generated from the proprietary Active Alts stock selection process which is based on quantitative factors and mechanically driven. Commissions were added. No taxes were deducted; no borrowing costs were added; and no ex-dividend costs were included from the short portfolio.
Downside deviation is a measure of downside risk that focuses on returns that sell below a minimum threshold of a Minimal Acceptable Return (MAR).
Sharpe ratio is the average return earned in excess of the risk free rate per unit of volatility of risk.

Time to recovery is the duration of time it takes to restore the value lost.

Beta is a measure of a stock’s volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a beta above 1.0.
Annualized volatility – Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option).
Max drawdown is an indicator of the risk of a portfolio chosen based on a certain strategy. It measures the largest single drop from peak to bottom in the value of a
portfolio (before a new peak is achieved).
(1) Indicators drive the exposure while a proprietary Long & Short portfolio are rebalanced monthly for the strategies equity drivers.
(2) Commissions were added to the exposure rebalance as well as the monthly stock rebalance.

 

The Fed is Getting Tipsy on TIPS

By John Del Vecchio and Brad Lamensdorf

Inflation expectations are headline news recently. The big question on many market watchers’ minds is what impact the reopening of the economy post COVID and flush with stimulus will have on inflation. Many have downplayed inflation expectations and the view that there will be a huge burst of inflation in coming months.

If that’s the case, why is the Federal Reserve – which has a vast balance sheet – snapping up TIPS? And, not just snapping them up, but buying them hand over fist!

Take a look at this chart:

The Fed is Getting Tipsy on TIPS
The Fed is Getting Tipsy on TIPS

Going back about 17 years, the current TIPS buying from the Federal Reserve is not just outside the norm. It’s in another realm.

Inflation as measured by the CPI is controversial. After all, adjustments are made for advances in technology and its impact in keeping inflation suppressed, for example.

The simple question is what does the Federal Reserve know that we don’t?

Extremes in any market are where the best opportunities lie. And, this is extreme.

Active Alts uses dozens of indicators to monitor extremes and pounce on opportunities with tremendous risk / reward ratios in the market. Book a call with Brad to learn how these indicators can help you navigate the markets in 2021 and beyond.

 

 

General Disclaimer

Active Alts, Inc. (“Active Alts” or the “Manager”) is an investment adviser registered with the state of Connecticut. Active Alts manages the Active Alts SentimenTrader L/S Strategy and SentimenTrader serves as the research/index provider for the strategy. Registration with the state of Connecticut does not imply a certain level of skill or training.
The information set forth regarding securities and investment advice was obtained from sources which we believe reliable but we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities. The performance quoted above represents past performance and current performance may be lower or higher than the performance date quoted. Past performance does not guarantee future results as investment returns may vary from time to time depending upon market conditions and the composition of the strategy.

SENTIMENTRADER DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. Investors should consult their tax advisors before making investment decisions, as well as realize that past performance and results of the strategy are not a guarantee of future results. The Active Alts SentimenTrader L/S Strategy is not intended to be the primary basis for investment decisions and the usage of the strategy does not address the suitability of any particular investment for any particular investor.

The Standard & Poor’s 500 Index is provided for informational purposes only. Indices are not indicative of the strategy and may not be suitable for comparison purposes. Indices that may be shown do not reflect the deduction of advisory fees, commissions or other transaction charges.
Fees charged by the Firm are negotiable and may vary by client.

Before making an investment, you should consider your goals, objectives, time horizon and risk tolerance to be sure that this investment is suitable for you. There are no guarantees that the strategy will perform as it did in the past. You could lose money and you should not invest unless you can afford to lose some or all of your invested funds.

Calculation Disclaimer
Dividends are included in the performance results. The Manager have also calculated the net results by applying the highest management fee to be charged to advisory clients. Results will vary based on the amount of the fee applied. The results were also calculated by rebalancing the long and short portfolios on a weekly basis. The portfolio selection was and will be generated from the proprietary Active Alts stock selection process which is based on quantitative factors and mechanically driven. Commissions were added. No taxes were deducted; no borrowing costs were added; and no ex-dividend costs were included from the short portfolio.
Downside deviation is a measure of downside risk that focuses on returns that sell below a minimum threshold of a Minimal Acceptable Return (MAR).
Sharpe ratio is the average return earned in excess of the risk free rate per unit of volatility of risk.
Time to recovery is the duration of time it takes to restore the value lost.
Beta is a measure of a stock’s volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a beta above 1.0.
Annualized volatility – Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option).
Max drawdown is an indicator of the risk of a portfolio chosen based on a certain strategy. It measures the largest single drop from peak to bottom in the value of a
portfolio (before a new peak is achieved).
(1) Indicators drive the exposure while a proprietary Long & Short portfolio are rebalanced monthly for the strategies equity drivers.
(2) Commissions were added to the exposure rebalance as well as the monthly stock rebalance.

 

No Inflation? Bullus Shitus

By John Del Vecchio and Brad Lamensdorf

If you’re an economist that lives in an Ivory Tower, there’s no inflation to speak of.

The CPI was up a seasonally adjusted 0.3% most recently.

If you live in the real world, you’d call that Bullus Shitus, as one might say in pig Latin.

Take a look at world food prices in the chart below:

No Inflation? Bullus Shitus
No Inflation? Bullus Shitus

Prices are straight up since last Summer.

People are not understanding that assets are going up because there is inflation and the purchasing power of money is going down.

But the bond market has been in a nasty down trend and it will eventually need to adjust to a higher rate.

This also will create multiple compression in the stock market and cap rates in real estate.

All the more reason to start to hedge your portfolio.

Speaking of hedges…in case you missed it…

Brad hosted a webinar on February 9th talking about achieving better risk-adjusted returns in an overheated market.

The Active Alts SentimenTrader Long / Short Strategy returned 25.87% in 2020 compared with 7.86[1] % in the Credit Suisse Long / Short Index.

What’s more, is that the Active Alts SentimenTrader Long / Short Strategy experienced a 9.99% draw down and held an average cash position of 19.4%[1] for the year.

The webinar dives into:

  • • How to navigate the rocky markets we have been living through
  • • How to generate alpha on the long and short side of the market
  • • The power of our proprietary exposure gauge and what it means for investment returns in current market conditions

If you missed the webinar, you can watch it here!

Brad Lamensdorf Jason Goepfert Webinar

General Disclaimer
Active Alts, Inc. (“Active Alts”  or the “Manager”) is an investment adviser registered with the state of Connecticut. Active Alts manages the Active Alts SentimenTrader L/S Strategy and SentimenTrader serves as the research/index provider for the strategy. Registration with the state of Connecticut does not imply a certain level of skill or training.
The information set forth regarding securities and investment advice was obtained from sources which we believe reliable but we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities. The performance quoted above represents past performance and current performance may be lower or higher than the performance date quoted. Past performance does not guarantee future results as investment returns may vary from time to time depending upon market conditions and the composition of the strategy.

SENTIMENTRADER DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. Investors should consult their tax advisors before making investment decisions, as well as realize that past performance and results of the strategy are not a guarantee of future results. The Active Alts SentimenTrader L/S Strategy is not intended to be the primary basis for investment decisions and the usage of the strategy does not address the suitability of any particular investment for any particular investor.

The Standard & Poor’s 500 Index is provided for informational purposes only. Indices are not indicative of the strategy and may not be suitable for comparison purposes.   Indices that may be shown do not reflect the deduction of advisory fees, commissions or other transaction charges.
Fees charged by the Firm are negotiable and may vary by client.

Before making an investment, you should consider your goals, objectives, time horizon and risk tolerance to be sure that this investment is suitable for you.  There are no guarantees that the strategy will perform as it did in the past. You could lose money and you should not invest unless you can afford to lose some or all of your invested funds.

Calculation Disclaimer
Dividends are included in the performance results. The Manager have also calculated the net results by applying the highest management fee to be charged to advisory clients. Results will vary based on the amount of the fee applied. The results were also calculated by rebalancing the long and short portfolios on a weekly basis.  The portfolio selection was and will be generated from the proprietary Active Alts stock selection process which is based on quantitative factors and mechanically driven. Commissions were added. No taxes were deducted; no borrowing costs were added; and no ex-dividend costs were included from the short portfolio.
Downside deviation is a measure of downside risk that focuses on returns that sell below a minimum threshold of a Minimal Acceptable Return (MAR).
Sharpe ratio is the average return earned in excess of the risk free rate per unit of volatility of risk.
Time to recovery is the duration of time it takes to restore the value lost.
Beta is a measure of a stock’s volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a beta above 1.0.
Annualized volatility – Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option).
Max drawdown is an indicator of the risk of a portfolio chosen based on a certain strategy. It measures the largest single drop from peak to bottom in the value of a
portfolio (before a new peak is achieved).
(1) Indicators drive the exposure while a proprietary Long & Short portfolio are rebalanced monthly for the strategies equity drivers.
(2) Commissions were added to the exposure rebalance as well as the monthly stock rebalance.

The Good Times are Rolling but the Market is Climaxing

By John Del Vecchio and Brad Lamensdorf

Buying climaxes are exploding!

This is bearish for the market.

A buying climax is when a stock makes a 52-week high but closes down for the week.

Take a look at the chart:

The Good Times are Rolling but the Market is Climaxing
The Good Times are Rolling but the Market is Climaxing

The red bar represents buying climaxing, and the blue bar is selling climaxes. As the chart shows, today’s situation is 180 degrees from where buying and selling pressure were near the COVID lows. Back in late March, massive selling climaxes occurred Right at the bottom!

Today, buying climaxes are exploding. These stocks are hitting new highs but closing down. As a result, those moves higher are running out of steam. The distribution of stock is increasing.

This is a bearish sign for the market.

This is another reason to starting planning hedges accordingly.

The Active Alts SentimenTrader Long / Short Strategy uses dozens of proprietary indicators, including buying and selling pressure, to adjust exposure based on market risks. SentimenTrader is a leading research firm with thousands of clients in over 50 countries around the world.

To learn how these strategies may guide your investment decisions over the coming months, book a complimentary call with Brad here.

 

DISCLOSURE: LAMENSDORF MARKET TIMING REPORT

Lamensdorf Market Timing Report is a publication intended to give analytical research to the investment community. Lamensdorf Market Timing Report is not rendering investment advice based on investment portfolios and is not registered as an investment advisor in any jurisdiction. Information included in this report is derived from many sources believed to be reliable but no representation is made that it is accurate or complete, or that errors, if discovered, will be corrected. The authors of this report have not audited the financial statements of the companies discussed and do not represent that they are serving as independent public accountants with respect to them. They have not audited the statements and therefore do not express an opinion on them. The authors have also not conducted a thorough review of the financial statements as defined by standards established by the AICPA.

This report is not intended, and shall not constitute, and nothing herein should be construed as, an offer to sell or a solicitation of an offer to buy any securities referred to in this report, or a “buy” or “sell” recommendation. Rather, this research is intended to identify issues portfolio managers should be aware of for them to assess their own opinion of positive or negative potential. The LMTR newsletter is NOT affiliated with any ETF’s.  Active Alts  is affiliated with Lamensdorf Market Timing Report. While LMTR uses charts from SentimenTrader, they do not have a financial arrangement with SentimenTrader  Past performance is not indicative of future results.

 

Stock Market Sentiment Continues Its Bullish Rage

By John Del Vecchio and Brad Lamensdorf

The stock market continues to set records and bulls are raging.

Weekly market sentiment, courtesy of Investors Intelligence, shows bulls at 61.2% while bears are in hibernation at 16.5%

Bulls have topped 60% (a major warning sign) for nine consecutive weeks while bears hover near a 2 ½ year low.

Stock Market Sentiment Continues Its Bullish Rage
Stock Market Sentiment Continues Its Bullish Rage

Exuberant market sentiment by itself doesn’t mean the market will tank. It does mean risks are elevated. Now is not the time to be complacent. Any event could start to top the balance. Swiftly.

That will make it easier for bullish investors to switch their stance and for bears to become more active. In our own testing, once bears start to move off the lows, the returns disappear.

Rapidly!

In fact, John’s own risk indicator yields returns of over 800% when the “all clear” is given compared to buy and hold returns of about 600%. Meanwhile, when the indicator is in the “red zone” the returns are -0.61% annualized.

We are not there yet. But investors should be on high alert.

Investors should be planning their hedges.

The Active Alts SentimenTrader Long / Short Strategy ended 2020 with a gain of 25.87% and a drawdown of 9.99%. The strategy has recently made adjustments to account for conditions in sentiment as well as over two dozen other proprietary indicators.

To learn more about how these indicators can help your portfolio performance, book a complimentary call with Brad today.

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