So what are the markets telling us now?

The markets have been quite strong since the Trump election. The Market SQN® score is bullish for the 100-day period as it is for 200 days. The S&P 500 has actually shown 11 new all-time highs in the last 100 days. The Market SQN score for 50 days is strong bull while the 25-day score is neutral — and has been so for 11 of the last 13 days.

In late April 2016, usdebtclock.org said our official debt went over the $19 trillion mark and now we are almost at $20 trillion. So, our politicians are doing their usual “wonderful” job of spending our money plus money they don’t have. Don’t expect Donald Trump to be any better.

Incidentally, website says there are 119.7 million U.S. taxpayers. I add together US Retirees (50.4 million) food stamp recipients (42.7 million) and disabled people drawing social security (10.6 million). I don’t think there is any overlap here. Those groups total 103.7 million and that’s why I say that they constitute a group that’s 86.6% of the number of taxpayers. I could also include all government employees (23.5 million) as among those supported by taxpayers - but they do pay taxes. Remember about 10% of the taxpayers (11.97 million) pay most of the tax revenue. By the way, the debt clock lists Medicaid, Medicare, and several other sources of benefits that I don’t include because I assume they are overlaps and thus lists 163.3 million people as receiving benefits. That’s over half the population. I’m now one of them, as I had to start taking Social Security after I turned 70. I guess I shouldn’t complain, as I never thought I’d collect any of it.

The market type classification tells us what is happening today — not what is going to happen tomorrow. All through October, the market moved mostly sideways in a relatively tight range, however, after the election the S&P jumped nearly 200 points and then it has been mostly in a range again now for the last few weeks. You can see that easily just looking at the S&P chart below of weekly bars going back one year. The only negative influence on the market has been some interest rate fears because the Fed raised rates twice late last year — but it decided to leave them alone yesterday.

Compare the price bar patterns to the Market SQN chart below. The Market SQN score has been neutral to bullish since June of 2016.

While volatility rose into the normal range in late September/early October for a few days, it has settled in the Quiet range since then. Right now, there is little danger in terms of volatility.

The table below reports the three major US Indices levels through Tuesday, January 31st. All three market indices are up nicely for the first month year of 2017. The S&P 500 is up nearly 1.79% on the year, the Dow is up 0.51% and the NASDAQ 100 is up 5.2%. The NASDAQ 100 is up almost as much in the month of January as it went up in all of 2016.

My model has generated mostly deflationary scores for the last few years. Deflation means that stuff generally becomes cheaper. In 2016, however, the model shifted results to the inflation side, which means that stuff tends to get more expensive. Markets move in correlation to inflation/deflation trends so it can be helpful to track these trends.

The tracking table below has historical and current year figures.

Here are the model components and how the prices looked at the end of February compared with two months back and six months back.

The score of 1.0 out of a possible 3.5 is again moving toward inflation, which continues the trend started in 2016.

Note: XLF recently had a stock split and declared a dividend. As a result, I will use the other three full components of the model and only use the two-month change portion of the XLF component. When we have six months of the new XLF price data, I will start using that long-term portion of the model again.

The US Dollar Index remains very strong because the Fed raised interest rates for the second time in December, however, the index declined for most of January. It’s now at 100 — which is still very strong. We are going to Singapore in February so if the Tharp effect holds, perhaps it’s time to start watching the Singapore dollar.

By the way, the absolute best trading opportunities these days are in Forex. We are hosting a Forex workshop in Singapore in a few weeks. We are bringing our Forex workshop to Asia in large part for the many Australians who are trading or want to trade Forex. We cannot, however, present “technical” trading workshops in Australia. The Forex workshop in Singapore in February is a great opportunity for anyone in the Asia Pacific region who wants to experience the numerous benefits of trading Forex. I’ll also be teaching a Peak Performance 101 workshop, our first one in Singapore in perhaps 10 years.

I wrote an update on the state of the market two weeks ago, and none of my conclusions have changed since that time.

Next month, RJ Hixson will write the market update as I’ll be returning from Singapore.

February 2017 System Quality Number™ Report

The SQN™ Report

Each month we look at the equities markets across the globe by segment, region, and sector. I want to caution everyone that the US Dollar (UUP) has a Market SQN™ score of 1.52 at the end of December and is 1.08 now. Since the entire World Market Model is based upon the US dollar, its strength could make foreign markets look much weaker than they actually are; they might be weak only relative to the strong US Dollar.

All of the US equity market segments are light green except for one yellow, IJK, which is midcap growth stocks. Microcaps have moved back from dark green, showing the tendency for a slight pullback in speculation. The other countries in the Americas are yellow and getting stronger so perhaps there’s not as much fear over a Trump presidency. Mexico is the remaining brown candidate, but even that’s an improvement — it was red last month.

As a region, Asia has gotten stronger. Malaysia is still red, and China, Hong Kong, and India are brown. That’s a function of Trump’s expected trading plans and the strong dollar. Australia is the strongest country in that section but its Market SQN™ score is only 0.59 — not very strong.

On the right hand side of the chart, Austria and Russia are light green, like last month, and emerging Europe has also moved into that category. Belgium, the Netherlands, Switzerland, and the UK are all brown. The African countries are also brown. But everything else in that section is neutral.

In currencies, only the US Dollar is green — light green after having moved there from dark green. The Brazilian Real is now neutral but everything else is either red or brown. The Japanese Yen is still the weakest currency.

In the US, the financial sector is dark green (the market is inferring a Trump presidency means the possibility for a lot of financial deregulation). Broker Dealers (strong markets), Insurance, Regional banks, and the Dow Transports are also dark green. The light greens include — Basic Materials, Consumer Discretionary, Industrial, Oil and Gas Equipment, Semiconductors, Technology, Aerospace and Defense, Media, Networking and Telecom. We have a few browns, Consumer Staples, Health Care, Pharmaceuticals, Retail, REITS, Food and Beverage. The only red is Volatility because this has been a very quiet market in the last 100 days (see the volatility chart in the Market Update article above).

Commodities have had an interesting month. Gold and Silver are red, while Agriculture and Global Water are brown. The neutral commodities include: Oil, Natural Gas and Livestock. Steel and Base Metals (which would profit during a Trump infrastructure buildup) are dark green. Commodities, Coal, Timber and Global Agribusiness are all light green.

With the Fed raising interest rates twice now and possibly raising them again sometime soon, the real estate and debt sections of the model are all red/brown except for High Yield Bonds, which are yellow.

All of the top 15 ETFs in the database are dark green with 6 of them having scores above 2.0. These include many of the ETFs we’ve been talking about — Brokers, Regional Banks, Base Metals, and Financial issues being way up on the chart. Copper is also way up there. The market is expecting financial deregulation under Trump with the potential that everything put in place after the financial crisis will be undone. That’s what’s expected so bank stocks are doing really well.

This month’s bottom list is entirely red but the whole list has scores greater than -2.0 — which is better than last month and actually, it’s better than the last few months. Two months ago, we had three ETFs below -3.0 which I’d never seen before. The weakest areas now include ETFs from a few former darling categories — Muni Bonds and various debt instruments. But Cocoa is also in there for some reason.

Let’s look at the summary table which measures the percentage of ETFs in each of the strength categories. At the bottom of the table, you can see the Jan 31st figures for the distribution of the database by Market SQN score in bullish, neutral and bearish categories just below.

This table has the database distribution for nearly the last four years —

In December, the split for bullish/neutral/bearish ETFs was 28%/ 32%/ 40%. This month it’s still pretty balanced at 25%/33%/42% but we’ve had two months in a row shifting more bearish.

So Donald Trump is now president. The markets have generally moved up although it seems the media uses Trump’s actions to explain days that are down in the markets.

Next month RJ Hixson will write this report, as I’ll be returning from our Singapore workshops.

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