Weekly Model Reading

Stocks finished lower for only the second time in the last eight weeks as uncertainty surrounding Greece’s bailout returned to center stage on Friday. However, after the relentless rise stocks have enjoyed this year, a pullback shouldn’t have surprised anyone.

The question of course, is if Friday’s decline was simply a case of traders not wanting exposure to weekend headline risk or the start of something more meaningful. Stocks are overbought, sentiment has started to reach extreme levels, and there is important resistance in this area on the charts of the S&P 500. As such, some additional selling to test support levels would seem to be logical.

Now let’s move on to this week’s reading of the Weekly Timing Model.

To review, the Weekly Timing Model attempts to "call" the direction of the action for the coming week via the historical readings of 10 models-of-models and more than 50 indicators. All three of our trend models remain positive this week while the seasonality and sentiment indicators are now negative. And while a couple other component models flip flopped, the overall weekly model reading stayed in the Neutral zone. This tells us that to lean toward the sidelines when in doubt this week.

So, with a decent trade on the books at the present time, we will be watching the action closely. And with our Daily Timing Model also neutral, we will be watching for a signal from our short-term trend following indicators.

Have a great day and enjoy the rest of your weekend...

David Moenning
Main: 630-250-4700
Direct: 303-670-9761

HCM's Active Risk Management Model Readings

Our active risk management strategy, which is designed to keep us in tune with the market's primary intermediate-term trends, employs two different models: Weekly and Daily. This multi-model strategy is our primary guide to risk management and exposure decisions.

We start each week with the inputs from our weekly model (which itself is comprised of 7 model-of-models and 3 key trend indicators). From there, we let our Daily Model (which is primarily trend and momentum oriented) keep us alert to changes in the market's trend.

For more on the development of our active risk management system, feel free to consult our Research Report: Developing an Active Management System for the U.S. Stock Market

Weekly Model (Our Guide to Market Exposure for the Week)

	Signal	Current Reading	Score
Weekly Timing Model	Hold	Neutral	+1

Note: The range of the weekly timing model is +10 to -10. Buy signals occur at a reading of +3 while sell signals occur at -2.


Weekly Model Components (The readings of the Indicators/Component models that comprise the Weekly Model)

Component Model	Signal	Current Reading
Short-Term Trend	Buy	Positive
Int-Term Trend	Buy	Positive
Long-Term Trend	Buy	Moderately Positive
Breadth	Hold	Neutral
Liquidity	Hold	Neutral
Seasonality	Sell	Negative
Volatility	Buy	Positive
Sentiment	Sell	Negative
Volume	Hold	Neutral
Economic	Sell	Negative

The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

Posted on 2/12/2012 at 5:54 PM