A Follow-Up

I had a few questions from yesterday's post and I thought I'd answer them today.

Please square your longer term bullish outlook with your recent change in your indicators.

We changed our shortest term indicator to NET MARKET NEUTRAL back on August 5, 2014 You can go here for a definition of what this term means.  Any changes we make in these indicators are based upon probabilistic analysis of market conditions and are meant to solely reflect the NET activity that has occurred in our client accounts.  We do not use these changes as a market timing mechanism.  If you are a casual reader of this blog, you should not construe these changes as a trading strategy that we employ across the board with all of our clients or attempt to emulate anything here as a personal strategy.  I have and continue to warn against this and therefore assume no responsibility if you ignore my advice.  

Will you be changing your target range for the S&P 500 now that the index has crossed 2,000?  

There are no plans to change our current target range for 2014.  That range is currently 1,700-2,100 on the S&P 500.

What is the greatest risk that you see to markets right now?

There are two things as I see it.  There is short term seasonal risk.  Late summer through October has traditionally been a seasonal period of weakness for stocks.  This has the potential to be compounded this year due to the elections in early November.  Apart from that, the biggest risk seems to be an exogenous event likely coming from one of the crisis areas of the world or a natural disaster such as an earthquake.  The hurricane season is shaping up to be rather mild this year so I think a Katrina type disaster is likely off the table.  The problem in managing a portfolio is that an event like this-one that could have a serious impact on equity valuations-is that it could happen tomorrow or it could happen never.  

What is one area that you would point to regarding the economy that is a positive and is often overlooked?

The great advances in innovation and productivity that have been occurring for about the past 10 years. These are driving new technologies and advances in many fields that should enhance economic growth for many years to come.

How will the Notre Dame Fighting Irish do in Football this year?

OK nobody asked me this but I thought I'd throw it out there anyway.  I see a range between 8-4 and 10-2. 

Posting schedule.  I'm out tomorrow and Monday is a holiday.  Expect posts Tuesday-Thursday next week.

*Long ETFs related to the S&P 500 in client and personal accounts although positions can change at any time.