Short-Term Caution, But Remain Long-Term Bulls

raghu@wayne.
edu
Tactical Portfolio Outlook

Week of 17 April 2017 Market perspectives for the long-term investor and portfolio allocator
Last week was a short holiday week, with reduced volume and trading activity. We have few developments in major markets,
and our biases and setups are generally unchanged this week.
Waverly Advisors, LLC
The most important development is probably the weakness in US stock indexes. Watch and see if the S&P continues to
break below the bottom of the daily bull flag. Adam Grimes
Any continued decline could lead to a large increase in volatility, and to sudden flushes in individual stocks. This is action Chief Investment Officer
which we have not seen for many quarters. Though it is premature to predict this in any way, it is worth considering the grimes@waverlyadvisors.com
types of market action that could follow a new decline from a period of complacency. info@waverlyadvisors.com
We are seeing a slight widening in the implied/realized volatilities of US indexes, perhaps indicating some additional stress
and pressure coming into the market. Contact Sales:
(607) 684-5300
These are short-term considerations; the longer-term picture is still strongly bullish and is unchanged. sales@waverlyadvisors.com
The USD is sitting in the middle of a larger range, while Treasury futures confirm short-term strength. www.waverlyadvisors.com
Watch precious metals, which appear to be aligning for further short-term gains.
Crude oil has rallied back above previous support; this level provides a useful reference for action this week. Contents
Portfolio Perspective 2
Market Bias 3
U.S. Equities 4
Major Market Direction and Bias U.S. Equity Sectors 5
Short term Int. Term Last Weeks Performance U.S. Individual Stocks 7
Market (< 1 month) (2-12 months) Market Return Spike Kpos Trend Volatility Global Stocks 9
USA (1.13%) (1.1) 63 Bull Quiet Rates & FX 10
USA Up
Commodities 11
Europe Up Up Europe (0.07%) (0.1) 81 Bull Quiet
Hedging: Context & Strategies12
Asia Up Asia (0.23%) (0.2) 88 Bull Quiet
Relative Strength Rankings 13
Trsry Futs Europe (0.07%) (0.1) 81 Bull Quiet Disclaimers & Contact 14
Dollar Emerging (0.58%) (0.3) 79 Bull Quiet
Pound 30 Yr Tr 1.65% 1.6 67 Bear/Neutral Quiet
Euro Down Down Euro 0.19% 0.3 40 Bear/Neutral Quiet
Yen Up Yen (2.19%) (1.7) 23 Bull/Neutral Normal
Gold 2.48% 1.5 82 Bear/Neutral Quiet
Gold
Crude 1.80% 0.5 58 Bear/Neutral Quiet
Crude
2017 Waverly Advisors, LLC. All Rights Reserved. Please review disclosures on the final page of this report.
raghu@wayne.edu
Tactical Portfolio Outlook, Week of 17 April 2017
Portfolio Perspective
Though last week saw muted trading in most assets, we think there are two develop- We think the widening spread between the VIX and realized volatility demands
ments that bear watching this week. some attention. (See the second chart below, and notice the gray shaded area, which
is the VIX the 20 day Historical Volatility of the S&P 500 Cash index, has reached
First, major US indexes have slipped into potentially bearish technical conditions. a level that, in the past, has indicated stress conditions for the market.) While the
As always, these are only statistical edges, but they are real and important tilts to actual level of both the VIX and Hvol remain low, this spread may give some insight
price direction. Any further decline is likely to be obvious to more market partici- into some concerns brewing just below the surface.
pants; there is also a risk of a feedback loop developing, in which selling leads to
further selling. If this happens, then volatility will be in the spotlight. How do we navigate this environment? First, think of these conditions as a prepa-
ration for a decline. Should the market recover early this week, then this spread will
It is no secret that volatility in nearly all asset classes has hovered near historic lows collapse and we will likely return immediately to business as usual. However, if we
for many quarters. This is true of stocks around the globe (chart below), currencies, do reach that feedback loop and see several strong down days, look for volatility to
commoditiesfor essentially every important market. Even significant geopolitical expand, and for the possibility of a minor market panic to develop.
disruptions (US election, Brexit, etc.) have seen only very short-term increases in
volatility, and markets have quickly returned to complacency. The reasons for these Keep this in contextthese are only short-term indications of potential stress. The
conditions are not fully understood. We tend to think that they are simply a normal longer-term picture for both long-term traders and investors remains strongly bull-
part of the market cycle, rather than being a shift to a new normal in which vola- ish. We will monitor developing market conditions on any decline, and will advise if
tility remains muted due to structural changes (e.g., an ever-increasing percentage of the bigger picture begins to shift significantly.
trading due to passive investments, etc.) In other words, we have been and continue
to be on guard for an increase in volatility.
2017 Waverly Advisors, LLC. All Rights Reserved. Please review disclosures on the final page of this report. 2
raghu@wayne.edu
Market Bias
IT LT 1 Year 3 Year IT LT 1 Year 3 Year IT LT 1 Year 3 Year
US Stocks Up World Stocks Up Rates & FX
S&P 500 SPY Up 11.9 25.0 Developed URTH Up Up 9.5 8.0 30 Yr Tr Rate $TYX.X 3.3 (6.3)
Russell 2000 IWM Up 18.9 18.0 Emerging EEM 13.2 (7.0) 5 Yr Tr Rate $FVX.X 5.6 0.3
30 Yr Tr Rate $TYX.X 3.3 (6.3)
US Sectors
Energy XLE Market 9.1 (25.0) Europe Fixed Income
Industrial XLI Over 14.2 21.0 Broad Europe VGK Up Up 4.3 (14.0) US Bond Mkt BND Caution (1.7) -
Technology XLK Over 18.1 45.0 UK EWU 1.4 (22.0) Treasuries TLT (6.4) 12.0
Materials XLB Market 11.5 8.0 Germany EWG 9.1 (9.0) TIPS TIP 0.8 2.0
Cons Disc XLY Over 8.9 36.0 France EWQ 6.7 (12.0) High Yield Bond HYG 5.7 (7.0)
Financials XLF Caution Market 23.1 29.0 Italy EWI 1.7 (30.0) World Bond BNDX Caution Caution (0.2) -
Cons Staples XLP Market 3.4 26.0 Russia RSX 19.4 (16.0) EM Bond VWOB 3.0 -
HealthCare XLV Market 5.7 30.0 Muni National LT MLN Caution (3.8) 5.0
Utilities XLU Market 5.7 22.0 Asia & Pac Muni National ST SHM Caution (0.8) -
Mtls & Mining XME 31.7 (30.0) Japan EWJ 7.4 13.0 Muni High Yield HYD Caution (2.1) 4.0
REITs IYR 2.5 16.0 China FXI 11.0 7.0
Homebuilders XHB 5.3 17.0 Hong Kong EWH 12.4 7.0 Commodities
Australia EWA 12.8 (15.0) Broad DBC Down 15.1 (41.0)
ex US India EPI 22.8 26.0 Gold&Slv GLD 4.0 (2.0)
Canada EWC 10.1 (11.0) South Korea EWY 13.5 (6.0) Oil USO 8.6 (70.0)
Mexico EWW (2.5) (21.0) Taiwan EWT 22.1 11.0 Natural Gas UNG Down 18.0 (71.0)
Brazil EWZ 26.2 (24.0) Singapore EWS 2.4 (16.0) Agricultural DBA Down (4.1) (32.0)
raghu@wayne.edu
U.S. Equities
Last week saw reduced trading activity due to several holidays. We have no sig-
nificant new information, and our biases and perspectives are essentially un-
changed from last week.
We have been watching the daily bull flag (and/or trading range), and the week
ended with what appears to be a breakdown out of that area.
If the breakdown continues, expect that volatility will expand, perhaps dramat-
ically, and that short term selling climaxes could occur.
Focus on market action, not headlines or geopolitical speculationin price ac-
tion, there is truth.
Bigger picture patterns still favor the upside for stocks.
raghu@wayne.edu
U.S. Equity Sectors

We have no changes to sector biases or allocations this week.
We hold overweights in Consumer Discretionary, Technology and Industri-
als.
Expect that these overweights will at least slightly underperform in the face
of broad market weakness, and should lead on any recovery.
We see warning signs in Energy, Healthcare, and Financials and look for pos-
sible continued underperformance there.
Sector Leaders & Laggards

Leaders COG, WMB, EQT, COP, NBL, CXO
Energy
Laggards SWN, RIG, DO, RRC, HAL, APC
Leaders CSX, ALLE, FBHS, FTV, KSU, EFX

Industrials
Laggards AYI!*, PBI, FAST!*, DAL, RHI!, DNB
Leaders STX, HPQ, WDC, ADBE, SWKS, RHT

Technology
Laggards FTR!, HPE!*, QCOM!*, FSLR, AKAM, NVDA!*
Leaders FMC!, IFF, ALB, MON, SHW, AVY

Materials
Laggards AA!, FCX, NUE!, MOS!*, SEE!, CF
Leaders CMG!*, PHM, WYNN, DRI, DHI, WYN!

Discretionary
Laggards UA, AN!, TSCO!*, KMX!, LB, SIG
Leaders LM, MCO, SPGI, AMG, XL, PGR

Fin Svcs
Laggards SCHW!*, FITB!, WFC!*, ZION!, SYF, CFG
Leaders KIM, GGP, VNO, CBG, MAC, AIV

Real Estate
Laggards AMT!, CCI!, HCN!, VTR, PLD!*, DLR
Leaders WFM!*, PM, MJN, RAI!*, STZ, KMB

Staples
Laggards GIS!, CPB, SJM!*, TAP, SYY, CVS
Leaders VRTX!, CERN, BAX, ISRG, ILMN, CNC

Healthcare
Laggards ENDP, MNK, PRGO(E), BMY!, ALXN, MYL!*
Leaders NRG, AWK, PNW, XEL, EIX, PPL

Utilities
Laggards SCG, SO, EXC, FE, AES, D
Key: ! = overextension, !* = extreme overextension
raghu@wayne.edu
U.S. Equity Sectors (continued)

Domestic Sector Model
Sector Ticker Benchmark Weight LastChg Rel. Perf.
Technology XLK 19.9% Over 1/6/17 3.8%
Financials XLF 16.7% Market 3/24/17 -
Hcare XLV 14.9% Market 7/1/16 -
Discretnary XLY 12.6% Over 3/31/17 -0.1%
Industrials XLI 10.4% Over 1/20/17 -1.6%
Staples XLP 9.7% Market 10/10/14 -
Energy XLE 8.0% Market 9/12/14 -
Utilities XLU 4.0% Market 10/10/14 -
Materials XLB 3.9% Market 2/17/17 -
Global Equity Model

Country Ticker Benchmark Weight Tilt Model
United States [USA] 51.1% Over 19.7% 70.8%
Japan DXJ 7.6% Market 0.0% 7.6%
United Kingdom EWU 6.2% Market 0.0% 6.2%
Switzerland EWL 3.6% Market 0.0% 3.6%
France EWQ 3.4% Market 0.0% 3.4%
Germany EWG 3.1% Market 0.0% 3.1%
Canada EWC 3.0% Market 0.0% 3.0%
Australia EWA 2.3% Market 0.0% 2.3%
China FXI 2.6% Under -2.6% 0.0%
EMI EEM 17.1% Under -17.1% 0.0%
Total 100.0% 100.0%
raghu@wayne.edu
U.S. Individual Stocks

Last weeks holiday trading provided us with little new information; our biases
and setups are essentially unchanged this week.
The point to watch this week is whether or not the breakdown in major US in-
dexes will continue. Begin the week favoring the short side.
As weve said for several weeks, this is an environment in which broad market
direction will likely dictate wins and losses on long/short side of the book. In
other words, stock selection matters less than market direction, and this will be
especially true if the market stages a large move.
Longer-term (2+ months), bullish patterns are still strong and intact.
Best short setups are stocks which are breaking down out of bear flag. Be pre-
pared to take profits proactively on shorts, as sudden reversals are likely.
Best long setups, if the market declines, are likely to be found in stocks that turn
first and hold up better than the broad market. While we do not advocated fad-
ing a decline by simply buying stocks, key patterns (selling climaxes, antis, and
other trend termination patterns on lower timeframes) may point the way to
some attractive entries.
Example Trade Entries

Buy MON on a breakout above 116.75 against an initial stop around 115.31.
Buy WYNN on a breakout above 118.19 against an initial stop around 111.95.
Sell (short) NSC on a breakdown below 111.25 against an initial stop around
117.62.
Sell (short) ROST on a breakdown below 63.19 against an initial stop around
64.33.
Key: Near (yellow) and Far (red) stops for daily bars. Colored band beneath the chart indicates trend condition (bright green to bright red = strong bull to strong bear trend.)
raghu@wayne.edu
U.S. Individual Stocks (continued)
raghu@wayne.edu
Global Stocks
Global stocks were mixed again last week: the US was down, as was much of
Asia, with Europe and the UK leading slightly to the upside.
Last week was a shortened holiday week, and trading activity, as expected,
was lower during this week. No major ex-US market made a move outside of
+/- 1.0 for the week.
We have no new technical information from markets, and no adjustment to
intermediate-term biases.
In most cases, weekly changes were within +/- 1.0well within the range of
statistical noise. We have very little in the way of new information for global
stocks.
Look for markets to come under slightly more stress this week, and watch
reactions carefully.
raghu@wayne.edu
Rates & FX
Only a few minor developments in last weeks shortened holiday trading:
Bond futures (both domestic and Euro) have confirmed strength and
eroded any bearish potential for the time being.
The US holds in the middle of a larger range.
This week, watch the USD; any move toward the bands (indicating signifi-
cant momentum) is likely to see continuation. Bond futures are most likely
to trade higher unless contradicted by a day or two of outsized declinesas-
sume bullish context, for now.
Regardless of crosscurrents, strong price action triggers (i.e., large sigma
moves on daily or weekly timeframes) are likely to lead to tradable patterns
and to moves that will have continuation.
raghu@wayne.edu
Commodities
Metals:
Precious metals slowly edge higher, but with no convincing short-term mo-
mentum. Keep in mind the big picture (weekly +), which indicates a possible
trend change to uptrend underway.
Energy:
Crude oil has now rallied back into the larger range. No edge at this time, but
risk factors still align to the downside.
Foods & Softs:
Watch sugar and cocoa for trades this week.
raghu@wayne.edu
Hedging: Context & Strategies

Tactical risks are slightly elevated as markets appear to be aligning for an interme-
diate term downswing.
Correct hedges will be initiated when implieds contract and should protect port-
folios against moderate declines (<15%) over six month horizons.
Key: Dotted line = S&P 500, Gray = Options, Orange = Combined Portfolio
raghu@wayne.edu
Relative Strength Rankings Tactical Portfolio Outlook, Week of 17 April 2017
International Now Chg VRat US Sectors (SP1500) Now Chg VRat US Industries (Top) Now Chg VRat US Industries (Bottom) Now Chg VRat
Brazil 2 -1 0.2 Information Tech 1 0 0.4 Comps & Peripherals 1 0 0.4 Electric Utilities 21 5 0.7
S Africa 11 14 0.9 Financials 3 -1 0.6 Internet & Catalog Ret 2 0 1.2 HCare Prov & Svcs 17 15 0.6
Taiwan 3 1 1.1 Materials 6 -3 0.9 Semis & Semi Equip 16 -4 0.9 Multi-Utilities 18 11 0.6
Mexico 1 1 0.3 Consumer Discretionary 5 1 0.9 Tobacco 3 4 1.1 Water Utilities 8 12 0.5
Nthrlands 6 1 0.2 Industrials 4 1 1.1 Commercial Banks 15 -9 0.5 Building Products 52 -2 0.9
S Korea 10 -2 1.6 Utilities 2 2 0.7 Elec Equip & Cmpnnts 13 1 0.8 Pharmaceuticals 39 14 0.5
Germany 14 0 0.3 Health Care 8 0 0.3 Media 7 2 0.4 Containers & Packaging 51 -8 0.5
France 13 -3 0.6 Consumer Staples 7 0 0.9 Auto Components 40 1 0.6 Beverages 38 4 1.2
Hong Kong 8 1 1.1 Telcom Svcs 9 1 0.7 Software 9 4 0.4 Metals & Mining 44 -20 1.3
Japan 24 0 1.0 Energy 10 -1 1.1 Trading Cos & Dists 50 -34 1.7 Construction Materials 27 -10 1.2
Sweden 20 2 0.5 US Industry Groups Now Chg VRat Div Financial Svcs 28 -5 0.7 Specialty Retail 49 3 0.9
Singapore 7 5 0.6 Tech Hardware & Equip 1 0 0.3 Aerospace & Defence 5 13 1.2 Construction & Eng 41 -6 1.0
Thailand 4 1 0.8 Semis & Semis Equip 6 -2 0.9 Communications Equip 30 3 0.6 REITs 43 4 1.5
Russia (NDQ OMX 15) 25 -22 1.0 Banks 4 -2 0.5 Machinery 14 -4 1.3 Professional Svcs 53 1 0.9
Australia 5 10 0.4 Media 2 1 0.4 Div Consumer Svcs 10 -2 0.8 Food Products 46 3 0.7
Switzerland 17 4 0.8 Consumer Svcs 3 2 0.6 Road & Rail 6 -1 0.9 Industrial Conglomerates 42 6 0.8
Finland 16 4 0.6 Software & Svcs 5 4 0.2 HCare Equip & Supply 24 12 0.4 Thrifts & Mrtg Finace 48 3 1.1
S&P 500 Index 15 -2 0.7 Diversified Financials 11 -4 0.5 Htls Rests & Leisure 12 3 0.6 Leisure Equip & Prds 59 0 0.9
Indonesia 12 -1 0.8 Health Care Equip & Svcs 8 5 0.5 Ind Pwr Prod & Trdrs 4 -1 0.8 BioTech 45 12 0.6
Israel 23 -5 0.6 Insurance 13 -3 0.9 Gas Utilities 11 -7 0.7 Air Freight & Logistics 57 -11 1.0
UK 18 1 0.6 Capital Goods 9 3 1.2 Chemicals 21 -2 0.7 Energy Equip & Svcs 56 -11 1.0
Greece 9 -3 0.4 Materials 12 -6 0.9 Capital Markets 31 -9 0.4 Automobiles 63 -1 0.6
Canada 21 1 0.7 Food Beverage & Tobacco 10 4 1.1 Life Scis Tools & Svcs 23 21 0.4 Personal Products 62 1 0.4
Arabia Titans 50 21 -4 0.8 Utilities 7 1 0.7 Internet Soft &Svcs 29 1 0.4 Div Telcom Svcs 54 4 0.7
Phlippnes 19 -3 0.9 Transportation 14 -3 0.9 Household Durables 20 17 0.7 Marine 61 -27 1.0
India (SP India 10) 26 0 0.3 Household & Prsnl Prod 17 1 0.5 IT Svcs 36 2 0.3 Txtils, Apprl & Lux Gds 58 2 0.4
US Mkt Cap Indexes Now Chg VRat Retailing 16 -1 1.2 Consumer Finance 34 -3 0.6 Oil, Gas&Consmble Fuels 55 0 1.0
US Growth 1 0 0.7 Commercial & Prof Svcs 18 -2 0.9 Health Care Tech 32 -11 0.9 Food & Staples Ret 47 9 0.9
S&P 100 Index 5 0 0.7 Pharma, Biotech & Life Sci 19 1 0.5 Insurance 37 -10 0.9 Distributors 64 0 1.2
S&P 500 Index 4 0 0.7 Automobiles & Compnts 24 -1 0.6 Airlines 25 14 0.7 Wireless Telcom Svcs 60 1 0.7
DJ Wilshire 5000 Comp 2 0 0.8 Cons Durables & Apparel 21 0 0.5 Electrical Equip 35 -10 1.3 Multiline Retail 65 0 0.4
US Value 7 0 0.8 Real Estate 15 2 0.6 Comm Svcs & Supplies 19 9 0.8
Russell 2000 Index 3 0 1.0 Telcom Svcs 22 2 0.7 Paper & Forest Products 26 -15 1.2
S&P SmallCap 600 Index 7 -1 1.0 Energy 23 -4 1.1 Household Products 33 7 0.5
Russell MicroCap Index 6 2 1.0
raghu@wayne.edu
Disclaimers & Contact Tactical Portfolio Outlook, Week of 17 April 2017
Waverly Advisors, LLC
5607 Pittsford-Palmyra Rd. #1034

Pittsford, NY 14534
(607) 684-5300 or info@waverlyadvisors.com
The Tactical Playbook (The Report) is a newsletter published by Waverly Advisors LLC. Receipt of The Report is subject to terms of service: http://waverlyadvisors.com/legal/terms-of-service/
Waverly Advisors uses reasonable care in preparing and publishing The Report, however, Waverly Advisors does not guarantee The Reports accuracy or completeness. Opinions expressed in The Report
are subject to change without notice. The Report, and www.waverlyadvisors.com (The Website) and all information provided therein should not be construed as a request to engage in any transaction
involving the purchase or sale of securities, futures contracts, commodities, currencies and/or options thereon. The risk of loss in trading securities, futures contracts, commodities, currencies and/or op-
tions thereon is substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition and discuss with their financial advisor(s). The information
provided in The Report is not designed to replace your own decision-making processes.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not
actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to
the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
Copyright Waverly Advisors, LLC 2016. All rights reserved. All material presented in this document, unless specifically indicated otherwise, is under copyright to Waverly Advisors, LLC. None of the
material, nor its content, nor any copy of it, may be altered in any way, or transmitted to or distributed to any other party, without the prior express written permission of Waverly Advisors, LLC.
This report is limited for the sole use of clients of Waverly Advisors, LLC. Any redistribution of this report or of its content will violate the terms of service.

Short-Term Caution, But Remain Long-Term Bulls

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Short-Term Caution, But Remain Long-Term Bulls

Загружено:

Авторское право:

Доступные форматы

raghu@wayne.

Tactical Portfolio Outlook

US Stocks Up World Stocks Up Rates & FX

30 Yr Tr Rate $TYX.X 3.3 (6.3)

REITs IYR 2.5 16.0 China FXI 11.0 7.0

Australia EWA 12.8 (15.0) Broad DBC Down 15.1 (41.0)

ex US India EPI 22.8 26.0 Gold&Slv GLD 4.0 (2.0)

U.S. Equity Sectors

Sector Leaders & Laggards

Leaders CSX, ALLE, FBHS, FTV, KSU, EFX

Leaders STX, HPQ, WDC, ADBE, SWKS, RHT

Leaders FMC!, IFF, ALB, MON, SHW, AVY

Leaders CMG!*, PHM, WYNN, DRI, DHI, WYN!

Leaders LM, MCO, SPGI, AMG, XL, PGR

Leaders KIM, GGP, VNO, CBG, MAC, AIV

Leaders WFM!*, PM, MJN, RAI!*, STZ, KMB

Leaders VRTX!, CERN, BAX, ISRG, ILMN, CNC

Leaders NRG, AWK, PNW, XEL, EIX, PPL

Key: ! = overextension, !* = extreme overextension

U.S. Equity Sectors (continued)

Global Equity Model

U.S. Individual Stocks

Example Trade Entries

U.S. Individual Stocks (continued)

Watch sugar and cocoa for trades this week.

Hedging: Context & Strategies

Waverly Advisors, LLC

5607 Pittsford-Palmyra Rd. #1034

Вам также может понравиться

Leaders WFM!, PM, MJN, RAI!, STZ, KMB