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Tuttle Tactical Management Weekly Market Commentary

Tuttle Tactical Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. You should not assume that any discussion or information contained in this letter serves as the receipt of, or as a substitute for, personalized investment advice from Tuttle ...

04/10/2013

The market continues to experience volatility around the new record high.  Again, this is to be expected as this is a very psychologically important level so we shouldn’t expect the market to blow through this and never look back.  There is still a lot of background “noise” in the markets.  Last week’s jobs numbers were disappointing, we have had some weaker economic numbers, Cyprus, etc.  None of this looks like it can change the fact that money has nowhere else to go but stocks at this point, but the economic numbers bear watching.  If the economy stalls then all bets are off for stocks.

More troubling right now is the divergence we are seeing between large stocks vs. small and mid cap stocks.  Below is the performance of ETFs that track the S&P 500 along with ETFs that track small and mid cap stock indices.  We are only 10 days into the month and this could always reverse but the divergence at this point is striking.  In the beginning or middle of a true rally we would expect “risk on” assets like mid caps and small caps to outperform larger stocks.  It is only towards the end of a rally that this relationship would be expected to reverse as investors look to reduce risk in their portfolios.  This is something that we will be watching very closely.

Asset Class

Proxy

Month To Date Return

S&P 500

iShares S&P 500 (IVV)

0.10%

Mid Cap Stocks

iShares Mid Cap Index (IJH)

-1.73%

Small Cap Stocks

iShares Russell 2000 (IWM)

-2.34%

Equity Markets
Our momentum indicators are still extremely bullish on the stock market.  Our positive reading on stocks does not mean that the market is guaranteed to rise from here.  There are still many risks on the horizon (Poor corporate earnings, problems in Europe, slowing economy, partisan bickering in Washington, etc) that could cause a selloff. However, our research suggests that when our momentum indicators are bullish the rewards of being invested outweigh the risks.

In the US we have shifted from small cap stocks into mid cap stocks as they are showing the strongest momentum.  This week we also added to positions in the S&P 500.  Globally, we continue to favor the US over international stocks.  Shorter term the market is looking slightly overbought.

Equity Matrix

Time Frame

Market Condition

TTM Positioning

Short Term

Slightly Overbought

25% Cash

75% Small Cap & S&P 500

Intermediate Term

Uptrend

Fully Invested- S&P 500 & Mid Cap

Fixed Income Markets
Our momentum indicators still show that most areas of the bond market are weakening.  We still see momentum in high yield bonds and we have added positions in preferred shares, local currency denominated emerging market debt, and international TIPs.

We continue to hold our counter trend position in long term Treasuries.  We understand that over the intermediate and long term Treasuries are probably the worst bet you can make, but over the short term they are looking oversold and have provided protection during selloffs.

Fixed Income Matrix

Time Frame

Market Condition

TTM Positioning

Short Term

Oversold

100% Invested in Treasury Bonds

Intermediate Term

Most markets in a downtrend

High Yield, Preferred Shares, Local EM, Intl TIPs

Top Holdings

1. S&P 500

2. Mid Cap Stocks

3. Cash

4. Small Cap Stocks

 

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