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Current mass positioning in the financial markets
This MACRO piece outlines the mass positioning that currently exists in the financial markets, why it is important that safety in numbers is not at all safe and what you should do about it. Subscribers can remind themselves of the indicators we at TFF regard as leading by revisiting the videos on fundamental leading indicators here, part of our comprehensive Trading Academy.
The first graph shows how exposed US households are to their equity markets. Whilst it is not at an all time high it is pretty close even though the S&P500 is at an all time high.
The following graph measures sentiment amongst the financial media, analysts, commentators amongst others. There are very few bears left.
The much followed Merrill Lynch Fund Manager Survey shows that just like retail, institutional investors are also maximally bullish.
From the graph it can be seen that low levels of exposure are buy signals and high ones, sell signals. We are currently at a high one.
This graph measures the breath and depth of the S&P500 market. It shows that even whilst the index is making new highs the number of stocks within the market breaking through both their 50 and 200 day moving averages are on the decline.
This means that the upward move is concentrated and concentrating within an ever decreasing number of stocks. Breadth and depth is falling. Not a good sign.
What does this all mean? It means that lots of money has poured into the market. This money is both retail and institutional.
The money is concentrating into ever fewer names all at a time when the discrepancy between corporate earnings and their respective share prices has parted company as shown by the last graph.
This graph is the worst one of the lot. It is the one that summarises all of the above and whilst all the above taken individually may not be deemed to be a cause for alarm, putting them all together paints a very dark picture.
Now assuming this piece has worried you even a little what can you do about it and where can you put your money to work?
The answer to the first question lies in our TRADING ACADEMY, our regular DAILY reports and our frequent MACRO analysis articles.
The answer to the second question is, in our fundamental view is precious metals. Subscribers will know that we place great emphasis on commodity values and commodity shares including precious metals as deep leading indicators. As a proxy for gold commodity companies we use GDX for large companies and GDXJ for the smaller ones.
What we are currently witnessing is strong outperformance for the small gold producers when compared to the metal itself. Since it low in the middle of 3/15 gold has climbed by just over 2%. GDXJ has risen by just over 20%. This out performance by a factor of more than 8 is not sustainable as the historic norm is closer to 4-5 times.
When the shares for commodities outperfom their underlying commodity it catches up. The opposite is also true. We therefore anticipate a meaningful rally in both gold and silver very soon.
To conclude, stay away from the stampeding lemming herd, you may end up over the cliff with them. Stay behind and pick up what they have discarded in abandon. Commodities.
DISCLAIMER
The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Users acknowledge and agree to the fact that, by its very nature, any investment in CFDs and similar and assimilated products is characterized by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.
Any recommendation, opinion or advice contained in such material reflects the views of TFF, andTFF expressly disclaims any responsibility for any decisions or for the suitability of any security or transaction based on it. Specifically, any decisions you may make to buy, sell or hold a security based on such research will be entirely your own and not in any way deemed to be endorsed or influenced by or attributed to TFF.
Past performance should not be seen as an indication of future performance. Market and exchange rate movements may cause the value of your investment to rise or fall and an investor may not get back the amount invested.
The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Users acknowledge and agree to the fact that, by its very nature, any investment in CFDs and similar and assimilated products is characterized by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.
Any recommendation, opinion or advice contained in such material reflects the views of TFF, andTFF expressly disclaims any responsibility for any decisions or for the suitability of any security or transaction based on it. Specifically, any decisions you may make to buy, sell or hold a security based on such research will be entirely your own and not in any way deemed to be endorsed or influenced by or attributed to TFF.
Past performance should not be seen as an indication of future performance. Market and exchange rate movements may cause the value of your investment to rise or fall and an investor may not get back the amount invested.
Investors considering opening a self-trading account or investing in the TFF Capital Pool, should limit their exposure to maximum 10% of their investment capital.
Eligibility for participation in the capital pool is subject to final determination and acceptance byTFF.
Investments are not obligations of, deposits in, insured or guaranteed by TFF.
Eligibility for participation in the capital pool is subject to final determination and acceptance byTFF.
Investments are not obligations of, deposits in, insured or guaranteed by TFF.
