The Dow continues to make new highs but the rate of climb has slowed considerably this week. This is normal as markets have to take a breather after large moves.
Equity Markets
Our momentum indicators are still extremely bullish on the stock market. Our positive reading on stocks does not mean that the market is guaranteed to rise from here. There are still many risks on the horizon (Poor corporate earnings, problems in Europe, slowing economy, partisan bickering in Washington, etc) that could cause a selloff. However, our research suggests that when our momentum indicators are bullish the rewards of being invested outweigh the risks.
In the US we are now heavily weighted towards small cap stocks as they are showing the strongest momentum.. Globally, we continue to favor broad based International Developed Stocks. Shorter term the market is now looking overbought so our countertrend models are now 100% in cash.
Equity Matrix
|
Time Frame |
Market Condition |
TTM Positioning |
|
Short Term |
Overbought |
100% Cash |
|
Intermediate Term |
Uptrend |
Fully Invested- S&P 500 & Small Cap |
Fixed Income Markets
Our momentum indicators show all areas of the bond market are weakening. High yield bonds are still the only area we see with any momentum as they can tend to trade more like stocks than bonds at times.
We continue to hold our counter trend position in long term Treasuries. We understand that over the intermediate and long term Treasuries are probably the worst bet you can make, but over the short term they are looking oversold and have provided protection during selloffs.
Fixed Income Matrix
|
Time Frame |
Market Condition |
TTM Positioning |
|
Short Term |
Oversold |
100% Invested in Treasury Bonds |
|
Intermediate Term |
Most markets in a downtrend |
1/4 Invested in High Yield Bonds |
Top Holdings
1. Cash
2. Small Cap Stocks
3. S&P 500
4. Dividend Paying Stocks
401k Advice
Below is our recommended allocation for 401k plans held outside of TWM:
|
Risk Tolerance* |
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|
Asset Type |
Asset Class |
Conservative |
Moderate |
Aggressive |
|
Stock |
S&P 500 |
20% |
33.3% |
|
|
Stock |
Mid Cap Stock** |
20% |
33.3% |
|
|
Stock |
Small Cap Stock** |
20% |
33.3% |
|
|
Fixed Income |
High Yield Bond*** |
33% |
13% |
|
|
Cash |
Cash |
67% |
27% |
|
|
100% |
100% |
100% |
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|
* This should be based on the amount of risk/return you are looking for on this block of money. |
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|
**If you do not have Mid Cap and/or Small Cap funds available that part of the allocation can go into the S&P 500. |
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***If you do not have multiple bond funds then fixed income allocation can go into an investment grade bond fund and/or multi-sector bond fund. |
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© Tuttle Tactical Management
