September 30, 2024

Preview from my weekly report*

Our clients are avoiding losses and preserving their capital, while we analyze and weigh the evidence every day, carefully calculating probable reward relative to probable risk. We offer complete transparency, anytime access to your funds, and low fees. You keep control over your money. See: ColbyAssetManagement.com

Investing grows more challenging when economic expectations diverge wildly.

Risk sentiment rose in global markets last week after the central bank of China (PBOC) announced a broad package of stimulus measures, including lower interest rates, a lower reserve requirement ratio for large banks, lower minimum down payment for second-home buyers, and liquidity support for stocks to allow securities, funds, and insurance companies to borrow from the PBOC to buy stocks. China is attempting boost confidence in the world's second-largest economy after disappointing economic data raised concerns of a prolonged structural slowdown. In light of weak consumer spending and weak housing markets, some western observers question whether the steps taken will be enough.

Although Wall Street talking heads remain ever hopeful of a soft-landing for the US economy, BCA Research maintains that a US recession remains the “most likely outcome,” despite recent policy shifts by the Federal Reserve. Although Wall Street assumes that falling interest rates increase the probability of a soft landing, BCA still expects a further downturn for the economy, driven primarily by weakening labor market conditions and continuing tight monetary policy. 

The Oracle of Omaha Warren Buffet continues to sell stocks and move money into Treasury Bills. Over the past 2 years, Buffet’s Berkshire Hathaway has increased its cash holdings by 2.5 times, which looks extreme when viewed in the chart. Buffet probably is not doing this because he thinks stocks offer good value at current price levels or because he believes that AI is about to launch the economy into a higher orbit. As Buffet says, “Be fearful when others are greedy.”

 The Conference Board Consumer Expectations Index, a leading economic indicator, declined by 4.6 points to 81.7 for September. Consumers were more pessimistic about business conditions, the labor market, and their income prospects. This index remains slightly above 80, however, which is the critical threshold that marks the dividing line between economic expansion and contraction.

On the other hand, The University of Michigan Consumer Expectations Index rose to 74.4 in September, up from 73.0 in August. Consumers said they felt more optimistic about business conditions, buying conditions, and inflation trends. This survey completely contradicts the Conference Board’s survey!

The latest economic and monetary data turned stronger over the past two weeks. Previously, our Colby Economic Expectations Index collapsed from April into August, 2024, indicating actual data releases were weaker than economists’ consensus forecasts.

Financial Stress turned down after 8/9/2024, indicating diminishing monetary restriction, which is bullish for the economy and for stock prices.

Market sentiment is approaching excessive greed, and stocks remain overbought and overvalued by all historical standards, such Price/Earnings, Price/Dividends, Price/Book Value. The Buffett Indicator (total market capitalization of the US stock market divided by gross domestic product) also suggests that stocks are overpriced. Warren Buffet continues to sell stocks and move money into defensive, safe-haven investments.

War in our world keeps escalating, unfortunately, with no end in sight. War is inflationary because high demand for war materials and labor drive prices up. Although at this point the current raging wars appear to have no effect on US markets, history shows that war can be very bearish for financial markets as war escalates.  

As we continuously weigh and measure all the technical and fundamental data, we conclude that a conservative long-term investment strategy with emphasis on preservation of capital is rational and prudent when market risk is high. Speculators and traders who are willing to take a chance on shorter-term market trends should pay very close attention to risk control because short-term trends are fickle and change frequently and suddenly. Economic, financial, and business fundamentals are uncertain, and geopolitical risks are significantly elevated. Risks lying dormant could suddenly surface.

11-Year Outperformance by the
Top 10 Exchange Traded Funds
Weekly Rankings of Major Trend Relative Strength
My weekly Top 10 ETFs ranked by the Major Trend Relative Strength outperformed the S&P 500 by over an 11-year period of real-time weekly tests. Click here for a graph of simulated performance.
Please note that my ETF rankings are available by subscription--NOW WITH A NO-RISK FREE TRIAL.
See The Colby Global Markets Report (click here).

My latest book was named one of the top investment books by Stock Trader's Almanac 2005. This book also received an excellent review in the November 2003 issue of Futures.

My ETF Rankings are not investment advice. Rather, they are an objective ongoing research study.

Analysis of market forces may offer a sense of probabilities. But the many variables that can impact market prices are notoriously difficult to predict. And, market analysis is something less than an exact science. So, sound trading tactics are always recommended. See my Money Management Rules.

According to CFTC Rule 4.41, hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

Trading and investing involve risk of significant loss. Your use of this site means that you have read, understood, and accepted my Disclaimer.            

Syndicate content on these pages

Email Colby about his Custom Research, Analysis, Trading Systems Development, and Investment Strategy
Consulting Services.

Subscribe to The Colby Global Markets Report

MetaStock® technical analysis software powers this technical analysis. 30-day free trial. Save 7%-9% by ordering here.

Preview Colby's Latest Book:
The Encyclopedia of Technical Market Indicators, Second Edition, 2003.

Dow Theory Analysis

Gann Angles Analysis

Update on EMA Crossover Signals

Money Management Rules

How To Become A Top Trader.

Ranking Indicator Performance to Maximize Profit by using
"Annual Relative Advantage".

Ranking Indicator Performance by the "Profit/Loss Index".

Robert W. Colby, CMT,
is a consultant to institutional and private investors and traders, providing regular analytical reports, custom research services, and trading systems tailored to clients' objectives. Clients include the most successful traders and investors in the world. Robert is the author of The Encyclopedia of Technical Market Indicators, Second Edition, McGraw-Hill, 2003, which has become the standard reference for indicator and trading systems design. Previously, at several large Wall Street firms, Robert worked as a proprietary trader, technical analyst, and fundamental analyst. He also was adjunct professor at New York University and New York Institute of Finance, where he developed new courses on technical analysis and market timing.

Robert W. Colby is a Chartered Market Technician (CMT), an accreditation granted to members by the CMT Association (https://cmtassociation.org/) after demonstrating professional competence and ethics over a period of many years. Robert has been a member since 1980, and he strongly supports the CMT Association's high standards. He also supports the The Technical Analysis Educational Foundation (https://www.taeducation.org/about/), which works to have technical analysis included in the curriculum of major business schools. "The CMT Association is the national organization of investment analysts, stock market analysis professionals, and certified market technicians in the United States."

Robert W. Colby is America's foremost authority on testing market indicators."
--Bill Meridian, top-ranked investment analyst and international fund manager, www.billmeridian.com

Privacy Policy: Your privacy is important to us. It is strictly against the policy of this website to employ spam, popups, ad ware, or spy ware.

Copyright © 2000-2024
by www.robertwcolby.com.
All rights reserved.
Except as permitted under the
United States Copyright act of 1976,
no part of this publication may be reproduced or distributed in any form or by any means, or stored in a data base or retrieval system, without the prior written permission of the publisher.
However, quotations are permitted, provided that full attribution is given to: www.robertwcolby.com

Ranking ETFs
"Robert Colby has evolved a system that, while hardly foolproof, is pretty clever," wrote Daniel Fisher, "Surfin' ETFs", Forbes, Investment Guide, Special Issue, June 4, 2007.
Please click here to view this article.

INTERVIEW of Robert W. Colby in Technical Analysis of STOCKS & COMMODITIES magazine, December 2006 issue.
Please click here to view this article.

"Gold's next move: History, logic, and intermarket relationships. See if testing gold's relationship to different markets over a 32-year period provides possible trade signals for the yellow metal."
by Robert W. Colby, CMT.
Please click here to view this article.

"Which gold indicators are best? Divining gold's next move."
by Robert W. Colby, CMT.
Please click here to view this free article.

"Applying the Relative Strength strategy to ETFs."
by Robert W. Colby, CMT.
Please click here to view this free article..

"PUTTING CANDLES TO THE TEST, How Profitable Are They Really?" by Robert W. Colby, CMT. Published in SFO, STOCKS, FUTURES AND OPTIONS MAGAZINE, Volume 5. No. 8. August 2006, pages 91-94. Please click here to buy this article. (Scroll to bottom of linked page.)

TradingMarkets.com interviewed
Robert W. Colby, CMT.
View the entire interview online.

Active Trader magazine September 2004 interviewed Robert W. Colby. 4 pages. "Robert W. Colby: Technical collector. A discussion with Robert W. Colby about technical trading and his revised Encyclopedia of Technical Market Indicators, Second Edition. By Active Trader Staff."

For information about methods that would have performed substantially better than systematic trend-following in back-testing simulation dating back 32 years, email me by clicking on the following link:
Please click here to contact Colby directly.

Click here for a simulated performance graph of one of my trading systems applied to a stock price index.

MetaStock® PC Software for Technical Analysis is a powerful program for your personal computer. It offers more than 250 built-in indicators and line studies to enable you to explore a wide variety of methods. And it empowers you to build, back test, and optimize custom trading systems to suit your own particular requirements. Click this link to save 7%-9% on MetaStock® software. And you get a risk-free, thirty-day free trial.