S&P500 likes to "cheat" investors...

In this hot Sunday I feel myself inspired, maybe because my holidays weeks are getting closer.
I want to post this chart, to discuss how the S&P500 often likes to cheat investors

Can you see it? I show you what is see....

S&P500 likes to take stops of long investors and let people to scream about the next bear market.

Last Summer China brought volatility on the markets and S&P500 dropped below old important support (see first circle on the left about at 1980). At the same time many technicians called for a bear market looming because weekly MACD crossed below 0.
In few weeks S&P500 stabilized and rebounded.

 This January a similar situation happened driven by crude oil crash. S&P500 broke the support 1880 and MACD again crossed below 0.  Again many investors called for a crash...but S&P500 was able to stabilize and raise again.

Now it stands close to record. What could happen?
Don't know if S&P will fall soon or later, but this is the scenario that could drive many investors towards the bad trading decision and I am waiting for it:
* For any motive S&P500 could fall in September/October below 2000
* MACD could again cross below 0 and let investors screaming about a bear looming
* maybe the most dramatic call could arrive if index drops for few days below the 1800 support (but the fall could just stop earlier, around 1850-1900 because of huge cash around).

Well, it's difficult to say what is going to happen, but I continue to believe that 2016 is the year of US Equity market compared to Europe and on the next dip I'll be buyer after few days of stabilization.
To become pessimistic about US Equity I want to see Global Fund manager in strong overweight on US equity. At the moment, according the monthly survey by Bofa-ML, the overweight is light.

Brexit - My diversification strategy with Sterling

The Brexit Story could add an interesting investing opportunity for long term investors (I'm not going in the short term technical situation with this post).
It's difficult to time exactly when the Sterling will touch the bottom vs euro and US Dollar, because UK Authorities doesn't have a plan yet, but I decided to start buying Pounds now.

Below in the chart in the area where I plan to buy Pounds vs Euro in coming quarters in a gradual path.

Basically my "buy area" is between 0,85 and 1. It's a wide range, but Brexit is an unprecedent event and it's very difficult to build a future scenario.

Because of this uncertainty, I am going to buy "a piece" every 3-4 months above 0,85 and close the position if the cross drops towards 0,80 before art.50.

ASSUMPTIONS & RISKS

There's an high uncertainty about Brexit timing (UK Premier May said it could ask art.50 by April 2017). Actually is not sure if UK will never ask art.50 and/or if they'll call for another elections before asking it.

My base assumption is that:
 - when UK will ask art.50, Economy could suffer (or market will expect an economy slowdown) resulting in Sterling depreciation. If they ask within 2016 the depreciation could be this year towards 0,90
- If they delay the call too much, we  could have a temporary £ strengthening, followed by a renewed depreciation later in 2017 or 2018
- From a long term point of view, the Pound is undervalued vs euro and US Dollar.

Technically the trend is for a eur/gbp vs resistance 0,90 and $/£ vs 1,25 in next quarters.

Because at the moment we have RECORD net short  £ speculators positions  vs USdollar (see CFTC data(, the market is exposed to risk of a short term reversal, that could be deep. Especially vs USd, a rise of cable towards 1,40 would not reverse the long term bear trend! That would be a good place to reopen short sterling positions if it happens with Brexit risk still real (if it happens because they renounce  is another environment and the short could not be appropriate)

That's why I began to invest in Sterling. Not heavily, but I am adding gradually exposure.
At the moment I just put the "toe in the water" a shy above 0,85. I'll add if it rises to 0,90.

In Summary: 

• Brexit timing is quite difficult to forecast, because also UK authorities don't know how and when do it (in my opinion)
• Sterling lost a lot since Brexit referendum, Economy is not suffering yet and Speculators have record net short positions on the currency resulting in a "short squeeze" risk
• I think it would be a nice moment to begin purchases of £ vs euro and $, not all in, but gradually. Personally I am going to buy above 0,85 eur/gbp every 4 months, and I'll be flexible with news. I'll close my position if in the short term the eur/gbp drops towards 0,80, because I think the Sterling needs to be weak to avoid recession when Art.50 is invoked. 
• I am doing this strategy buing European Investment Bank bonds in £ that still have small positive yield, with a maturity between 2 and 3 years. If you are a US investor, you're lucky because you can also buy Gilts, hedge them and have an yield (hedged) much higher than your Treasury yield on the same maturity

July Performance

Here we go with the performance.
July was a very good month, because all models recorded positive returns.
Trend is back and they caught the juice... ;-)
You can see the monthly performances in the tables below. 

Below I show the Year-to-date returns graph  and I am glad to see all models positive. Model 4 US version is worse than benchmark, but it's fine. It is built to lag benchmark in bull markets, while overperforming strongly when the bear comes. Performance are in line with the risk of the models with Model 1 (safest) that as the lowest return and Models 3 (more aggressive) that have the highest retuns, in average.

I am satisfied because, this was a difficult year for many multi-asset funds and Models were able to cope with this market. Unfortunately it's becoming always more and more overvalued on most assets and dangerous because of this crazy NIRP World.
Let's hope models will be able to "limit the losses" when financial markets will enter in bear market.

To improve the universe of asset Models can invest, at the moment I am working on a project to diversify among almost 100 ETF. It will take time, but hope it will be finished within end of 2016

NOTE; Because of holiday, I don't know if I'll be able to post September Allocations at the beginning of the month. If I won't be able, I'll update them after approx 24 days. A bit late, just for diary purpose, but I need an holiday :)

August Allocation

Hi, Here we have the August Allocations.
I am very satisfied with July performance, I'll elaborate them further in next days.