U.S. Markets, except the SPDR Dow Jones Industrial Average (DIA) present as the most relatively expensive while Emerging Markets (EEM), and the Eurozone Far East & Australasia (EFA) present as cheap this week, says Ziad Jasani.
My video commentary recorded June 1:
Major Index Direct Price Regression: When humans move very far away from “normal” routines they tend to come back “home.”
In markets, we call this “mean-reversion.” The channels to the right are direct closing prices day over day, enveloped in 2 Standard Deviation Channels (“home” is the middle of the channel).
Currently, the Eurozone Far-East & Australasia (EFA) & Emerging Markets (EEM) present 2 Standard Deviations cheap, the S&P 500 (SPX) 0.5 Standard Deviations cheap and the Nasdaq (COMPQ) is just north of neutral (home); the S&P/TSX Composite Index (TSX) presents as 0.25 Standard Deviations expensive. This presentation suggests that equities can advance, especially EFA & EEM, but a catalyst is required (i.e. Italy fixed, USD down).
Trading Bloc Positioning: This chart compares major trading blocs back to the entire global equity market (ACWI) to determine which spaces are relatively cheaper or more expensive.
Why? Capital flows usually tilt towards relatively cheaper spaces, especially if a macro market swing-low formation takes hold.
U.S. Markets, except the SPDR Dow Jones Industrial Average (DIA) present as the most relatively expensive while Emerging Markets (EEM), and the Eurozone Far East & Australasia (EFA) present as cheap.
The TSX presents as 2 Standard Deviations expensive, which implies that if the current macro market swing-low advances this week the TSX is likely to under-pace the world, or if prices turn down, the TSX is likely to move down at a faster pace.
Since the late-Jan. 2018 correction we are in “full swing-trading mode” with our short to mid-term capital and remain Hold with our longer-term holdings, while the S&P 500 remains above its 200-day average.
View the Independent Investor Institute trading ideas and strategies videos here.
