Market Timing 101: Embrace Non-Linearity - timing

U.S. Consumer Confidence hit a 204-month high recently. On the news, the stock market hit all-time highs last week. But you didn't hear this from the mainstream media last week. It was all about stoking political fears.

"Stocks went on a wild ride on Friday following news that former White House national security adviser Michael Flynn would plead guilty in the Russia investigation, bringing the probe closer to President Donald Trump," Politico reported on Friday.

We have no edge on the outcome of this investigation and what that might mean for the stock market. Think about it: The stock market has been hitting new highs all year in spite of concerns about Special Counsel Robert Mueller's Russia investigations. So back to what matters... measuring and mapping the data. 

Who could have predicted precisely at the start of 2017 that Consumer Confidence would hit a 17-year high ? No one. That’s the point.

“Embrace the non-linearity of it all,” says McCullough said in a recent free edition of The Macro Show (our daily pre-market TV broadcast). We run a GDP predictive tracking algorithm that tracks economic data to forecast where the U.S. economy is headed next. We’ve been calling for U.S. #GrowthAccelerating for over a year now. We’ve been right.

“Accept being uncomfortable every day because that’s the way this business can be. The bigger question is are you bullish or bearish? And did you buy the damn dips throughout the year as the market continued to hit all-time highs?”

Market timing is difficult, especially if you’re using a single-factor model, like the 50-day moving average. There’s no predictive value in that but there is a better way. Our quantitative risk ranges embrace the psychology of markets by incorporating signals on price, volume and volatility. A bullish signal? Stock market volume has been accelerating and volatility falling, with every all-time high in stocks, as McCullough reviews on The Macro Show:

“Down days have been met with low volume and up days have been met with rising volume. So again accelerating volume, break outs to higher highs for the stock market and falling volatility, those three things largely explain why you continue to buy the damn dip.”

Click here to watch the entire free edition of The Macro Show.

Market Timing 101: Embrace Non-Linearity - consumer conf

Market Timing 101: Embrace Non-Linearity - the macro show