Models Remain In Good Shape

Since my wife and I are helping out with family in Chicagoland this week, I won't be able to keep to the new publishing schedule. However, since I update all the models as part of my weekly routine, I thought I would provide an update to our favorite models via a single report. Things are going pretty well here on the family health front, so I expect to be back at my desk by the end of the week. As such, I hope to return to my new publishing schedule next week.

Here's wishing everyone a great week.

Weekly Market Model Review

Each week we do a disciplined, deep dive into our key market indicators and models. The overall goal of this exercise is to (a) remove emotion from the investment process, (b) stay "in tune" with the primary market cycles, and (c) remain cognizant of the risk/reward environment.

The Major Market Models

We start with six of our favorite long-term market models. These models are designed to help determine the "state" of the overall market.

There are no changes to report on the Primary Cycle board this week. As I've been saying, I believe the board supports the idea that stocks are currently in the midst of a cyclical bull market and suggests that the bulls should be given the benefit of any doubt.

* Source: Ned Davis Research (NDR) as of the date of publication. Historical returns are hypothetical average annual performances calculated by NDR. Past performances do not guarantee future results or profitability - NOT INDIVIDUAL INVESTMENT ADVICE.

The State of the Fundamental Backdrop

Next, we review the market's fundamental factors in the areas of interest rates, the economy, inflation, and valuations.

There are also no changes to the Fundamental Factors board to report again this week. As I've been saying, I believe the key to the current environment is the stimulus/support being provided by the Treasury/Congress/Fed. From my seat, the unprecedented efforts to support the economy basically override the readings in many of our models.

The State of the Trend

After looking at the big-picture models and the fundamental backdrop, I like to look at the state of the trend. This board of indicators is designed to tell us about the overall technical health of the current trend.

The trend board improved again last week as the market advance attempted to broaden out a bit. However, the key here is to recognize that all the major stock market indices remain entrenched in trading ranges.

The State of Internal Momentum

Next, we analyze the "oomph" behind the current trend via our group of market momentum indicators/models.

The Momentum Board saw modest improvement last week as our short-term volume relationship model upticked. All in, and despite the somewhat sloppy price action, the momentum board suggests that the bulls still have the edge.

Early Warning Signals

Once we have identified the current environment, the state of the trend, and the degree of momentum behind the move, we then review the potential for a counter-trend move to begin. This batch of indicators is designed to suggest when the table is set for the trend to "go the other way."

The Early Warning board continues to slip toward the bear camp. And while there is no "table pounding" signal at this time, additional downside price action wouldn't be surprising here.