Calendar of upcoming economic data releases
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Older Commentary:
December 31, 2011 Is Buy-and-Hold dead? For 2011, the S&P500 ended almost exactly where it started, losing 4 cents, from 1257.64 to 1257.60. That's rather amazing, considering all the gyrations, chaos, panic, and confusion during the year.
Most pundits fail to account for dividends, though, which will come in near the 2% mark for the year. So, total return will be very near 2% for 2011.
Here's to a healthy, happy, and profitable 2012!
November 2, 2011 During testing for our mid-year model update, we were unable to find any significant improvement over our current model. That leads us to believe we are still on the right track. While we were hoping that new data points from this wildly-volatile market would give us some updates, none were found. We tested many points where data bumped up against limits, and did not find any reason to move the limits we had already set. We continue to test, but so far, so good. We are pleased with the model and its performance to date.
August 5, 2011 Update: S&P500 1200. Several subscribers have asked why the Trading Indicator failed to anticipate the recent market selloff. Just to recap: On July 21, the Trading Indicator issued an intraday overbought alert at S&P 1343.55. The market began its descent from there. As the market descended, the Indicator moved away from its overbought position, and was no longer in overbought territory by the end of the day. Those who sold near 1343 exited the market near its recent high. The official model, which is based only on reading at the close each day, remained in the market. The performance numbers shown on the site reflect the model's acting only on closing data, so do not reflect the July 21 overbought intraday signal.
The Trading Indicator reentered oversold territory on July 28th, near the S&P 1300 level. From there, the market continued its slide.
Even with the benefit of hindsight, we still are not sure why the market has fallen so dramatically. Most of the news (US debt ceiling negotiations, foreign debt crises, weak GDP, weak employment numbers, etc.) have been known for some time. This appears to have just been a "perfect storm", where all events came together, and caused a selling panic.
When the US Bureau of Economic Analysis revised previous GDP numbers downward, it exposed the US economy as much weaker than commonly believed, much weaker than US politicians have been propagandizing. It reminded us of the famous Warren Buffet quotation, "It's only when the tide goes out that you learn who's been swimming naked." Please click this link: Real GDP Chart to view the recent revisions. After the revisions, Real GDP appears to be falling again, and was dangerously close to entering negative growth in the first quarter (just 0.36% growth, annualized). If this pattern continues, a double-dip recession is on the horizon. One must keep in mind that the Federal Reserve's QE2 has ended, that stimulus spending is waning, and that the US government has just committed to an austerity program, with reductions in spending growth (not spending cuts!) ahead. While healthy for the US economy long-term, this certainly does not bode well for short-term economic growth.
Nothing in our Trading Indicator model could have foreseen this confluence of events. All we can do is to move forward, trying to capture new gains.
March 25, 2011 Subscribers have asked why the Trading Indicator appears to be stuck at the same reading since yesterday. The Indicator is correct, but we wanted to explain why it has not moved. One of the inputs is up against a limit. This is seldom-entered territory, but from our historical back-testing, this is the proper reading for the Trading Indicator. (NOTE: there really aren't a comfortable number of data points for this limit in history, but from the few that we have, the indicator should be where it is. It is nice to have this limit again to test. In our next update, we can adjust for market behavior during this rare situation.)
February 7, 2011 As of Friday, the CrystalBull.com Trading Indicator was outperforming the S&P 500 by 0.3% YTD, and the model issued an overbought signal. With today's runup, the S&P500 will have pulled back ahead, marginally. This demonstrates just how difficult it is to outperform an index during times of such strength, when trading only that same index in a long-only model. Simply matching those strong returns is a feat in itself. For several months, the market has been heading higher, almost in a straight line. We are comfortable in simply staying even with the market during such a runup.
February 7, 2011 Our end-of-year model update is done and installed. To get an idea about how the update changed the model, we decided to provide the new results by updating the August 8, 2010 message below. There, you can see the year-by-year performance of the previous model to the current update. While most years had very minor performance changes vis-a-vis the old model, the overall performance increased slightly. What is comforting to know is that, while another half-year has been added to market history, no major changes were necessary. This leads us to believe that we are on the right track. As history unfolds, we will continue to fine-tune the model. Thus, the word "Seeking" in our tag line: "Seeking to build the world's most accurate stock market timing model!"
August 8, 2010, updated February 7, 2011 Our mid-year update is here, and it has been worth the wait! During the last few months, we have made several discoveries in the data that have greatly improved the accuracy of the Trading Indicator. The trading results and consistency of the updated formula are almost hard to believe. Yes, the formula is complex, but still elegant, and produced incredible results. Since 1/1/96, using a long-only trading system, the CrystalBull Trading Indicator would have outperformed the market by over 100x! It beat the market 12 of the 15 years, usually by wide margins, and never had a down year. Click here to see the historical performance of the updated CrystalBull Trading Indicator. Here is a table of year-to-year results:
We are amazed at the consistency of the model, and its ability to find the turning points. That is exactly what we look for in a market timing model. What is impressive is how well the model thrives in times of high volatility. When you see the historical performance in a linear chart, it is truly striking.
Here is the historical performance in linear form (remember, the formula does not change in 2008, but the volatility and volume do):
Market timing model historical chart, linear format.
We are looking forward to watching what the new model does going forward. We hope you are as excited as we are about the updated CrystalBull Trading Indicator!
May 6, 2010 Update: S&P500 1128. Today was one to remember, and well highlighted the effects of panic and tumult (emotions) in the stock market. The market has been selling off recently, due to the economic crisis in the Eurozone. At around 2:30 PM EST, some program trades kicked in, the information system broke down, and the market plunged nearly 6% within 15 minutes. It is rumored that a large trader inadvertently entered his order in "billions" instead of "millions", causing quite a sizable downtick. Quotation systems went down, fueling the panic. Even Yahoo Finance and Bloomberg, public sites that are built to handle large volumes of simultaneous traffic, were inaccessible. We watched as quotations came in on the Dow 30 at -300, -400, -600, -700, -900, -1000 within minutes, then quickly recovered. At one point, the S&P 500 was down over 100 points. That was an almost unbelievable drop. Today's selloff was caused, not by any breakdown in fundamentals, but by a breakdown in information! If you want to get an idea of what this was like in real time, here is a great video clip from CNBC, while the panic was happening. Jim Cramer astutely called the information "apocryphal":
CNBC market crash video
While we could sense a correction coming, the market seemed to keep shrugging it off, rising to recent new highs in light of the information coming in from the Eurozone. We had hoped that the model would be out of the market when the correction came. But, alas, the model issued an oversold signal after the April 27th correction, and did not find an exit point since that date. Today, the Trading Indicator remains in "Oversold" territory. This means that the model is expecting a short-term runup to the next exit point, where we can take a breather. One of the benefits of the CrystalBull.com Trading Indicator is that it is out of the market about one-half of the time, meaning its risk of being in the market during such a Black Swan event is cut in half. Unfortunately, this time the event occurred while we were in the market. So, our gains for 2010 have been erased. Fortunately, we have lost less than 1% YTD, and we hope to recover that quickly.
Apr 2, 2010 Update: S&P500 1178. Today, the U.S. Bureau of Labor Statistics released its monthly Employment Situation report, showing that nonfarm employers added 162,000 jobs in March. This is rather close to what the consensus estimates were. Any increase in jobs is good news in this environment, but we have a long way to go to recover the millions of jobs lost in 2008-09. This New Jobs Chart clearly shows the jobs trend has improved, but the US really needs several months of 250,000+ new jobs added before the unemployment picture starts to strengthen. We remain at a 9.7% Unemployment rate [chart], not including the "underemployed".
Analyzing the new jobs figures, we see that, in the 162,000 jobs added, 48,000 were temporary workers hired by the U.S. Census, and another 40,200 were added by private-sector temp agencies. 45,000 were added in the private Education and health services sector, which is a growing field. Subtracting out the temporary jobs added, one can see that employment is rather flat, and improving very slowly. This is consistent with the jobless recovery we have been forecasting. The U.S. really needs a "next big thing" to get all the underemployed working again. Will it be in energy? Health care? Or, will the U.S. slowly transform into a stagnant service economy? Stay tuned.
The U.S. stock markets are closed today, but the futures market likes today's news. If we get a few days of pushing the S&P 500 higher, we may get another nice exit point.
Mar 29, 2010 Update: S&P500 1173. There is an interesting article in the New York Times today, titled Stocks Soar, but Many Analysts Ask Why. It echoes something we've been noticing for several weeks: that the market has been surprisingly strong, shrugging off each day's negative news. Many widely-used technical indicators have failed during this period. This proves just how difficult our endeavor is. It is very difficult to beat a market that continues to rise through adversity. Where the CrystalBull Trading Indicator shines is during periods of market weakness, when it exits the market. Of course, the idea is to be in the market during periods of strength; that is where the gains are made. But the gains are preserved by exiting the market preceding times of weakness. The Trading Indicator correctly picked overbought signals on January 11th and February 2nd, but did not find a good time to re-enter the market since early February. The market appeared poised for a correction.
This brings us to a very important point in choosing and using a market timing or trading system. Our purpose is to remove the emotions and guesses from buying and selling decisions. It is nearly impossible for a trader to guess correctly on any consistent basis, and emotional decisions usually prove to be wrong. Knowing the strength of the algorithm we use in the CrystalBull.com Trading Indicator, we have every confidence that it will outperform the market in the long run. But, there is a lot of noise and chaos in the stock market. Thus, even a trading system with a 90% probability of beating the market over the long run, may have only a 60% probability of beating the market in any given month.
So, we continue to hang in there. We expect the last few weeks to prove to be an anomaly in a historically great timing model.
Mar 29, 2010 Update: S&P500 1173. Today's new Personal Income data tell the story of the current US economy in a nutshell. Here are the year-over-year (Feb2010/Feb2009) changes in the personal income components. Bear in mind that the US population increased by 0.9% during this period, and these figures are the aggregate of the entire population:
Next up... The New Jobs report will be issued Friday. We are not expecting any real surprise in the number, but the survey has a wide margin of error. The markets will be closed Friday, but look for Monday to be interesting if the number varies to any great extent from the consensus estimate..
Mar 1, 2010 Update: S&P500 1114. As we pour through today's Personal Income data, here are a few insights:
Tuesday's Overbought signal was tough to swallow. The market was climbing like a rocket, and the pundits were bullish. The CrystalBull.com Trading Indicator exited the market, while the herd lost nearly 3% in 2 days. Tune out the noise. We all can use a little more free time and less stress in our lives.
The headlines from last week's Personal Income data were all positive: "Personal Income UP, Disposable P.I. UP, Savings rate UP." But digging into the data reveals some important trends. Yes, private industry wages were up 0.1%. (Remember that there has been a large amount of government stimulus spending.) But government employee wages were up 0.24%, and government social benefits were up 0.65%. Couple this with the fact that social insurance contributions rose only 0.08%, and Personal Taxes actually fell 0.13%, and you can see that this is unsustainable deficit spending. (Also, a head-scratcher in the data is that private farm income nearly doubled from September to December. If you have an explanation for that, please email us.)
Dec 23, 2009 Update: S&P500 1119. Personal Income numbers for November came out today. Just a few minor insights in this very important report. First, the headlines read that Personal Income rose 0.4%, while Personal Spending rose 0.5%. Those are slightly respectable, but nowhere near high enough to sustain a real economic recovery. Digging into the numbers, we see that the majority of the increases were in the following areas: 1) proprietors' income (both farm and non-farm business owners are doing well). 2) In the Employee wages section, we see that the majority of the increase was in the service sector. That is not surprising, but worth acknowledging. 3) Government wages were again higher. 4) Passive income (rentals, interest, dividends) made up much of the remaining increase. Manufacturing remains weak. Studying our Personal Income chart, it is difficult to call a recovery in the trend.
Dec 4, 2009 Update: S&P500 1098. A happier jobs report: job losses are slowing. But it should be tempered by the fact that 52,000 of the jobs created were temporary jobs. With new employment taxes and regulations pending in Congress, it is no wonder we are having a jobless recovery. Also important to note, the jobs losses for September and October were both revised, showing results better than previously reported. September had job losses 80,000 less than previously reported, while October had job losses 159,000 less than previously reported. So, as you study our New Jobs chart, you will see that the job market is turning around. That is an important trend of which an investor should be aware.
A little tidbit to tell your children/grandchildren: Unemployment rate among college graduates: 4.9%. High school graduates: 10.4%. Less than high school diploma: 15.0%. (Essentially 5, 10, 15%, depending on education.) Education is extremely valuable at all times, but really shines during a recession.
Nov 28, 2009 Update: S&P500 1091. Just a follow-up to this week's Personal Income numbers. It is puzzling that Personal Income would be within 1.5% of its 2008 high, as we have witnessed wages and employment fall across the board. So, we wanted to dig a little deeper into the numbers. First, we use real (adjusted for inflation) numbers in our Personal Income analysis. We have had a very modest 0.21% DEflation since May, 2008, so purchasing power per-dollar has actually increased slightly. And yes, wages and salaries have decreased since May, 2008, but there are some insights in the numbers:
In private industries, wages have decreased by 4.8% overall. While that is not a healthy sign, it is a smaller decrease than one might expect with the job losses, furloughs, and pay cuts we have witnessed. And this decline in private industry wages has been offset by INCREASES in government wages (+4.2%), Social Security payment increases(+10.3%), and unemployment benefits paid (+273.4%). Disposable Personal Income fared even better, as income taxes fell.
So, it appears that government deficit spending has filled in the gap in personal income. We thought that was interesting, and that our subscribers would as well. We will save the political diatribe for another day, but we wish the American media would dig into the numbers to paint a clearer picture.
Nov 25, 2009 Update: S&P500 1108. Very strong surprise in today's Personal Income numbers. The BEA announced Personal Income figures for October, and revised the PI numbers all the way back to April. The last 6 months' figures were revised upwards from approximately 0.5% to 1.25%. Those revisions were a surprise, and proclaim that the US consumer is in a much stronger financial position than one might expect. In fact, in REAL terms (adjusted for inflation), Personal Income is within 1.5% of its May 2008 high. Disposable Personal Income (actual buying power) is within 1.25% of its May 2008 high. This is remarkable in this environment.
Durable Goods orders remain very weak. Until consumers start spending again, Unemployment will remain high, and growth will be slow. We are seeing signs of the jobless recovery we have anticipated.
An interesting, non-partisan look at how Socialism has crept into American life: Stalin's America
Nov 18, 2009 Update: S&P500 1105. Some insights into today's data releases... First, the headline reads that Consumer Prices rose 0.3% for October (a 3.6% annual rate). At first, that certainly appears as if inflation is coming back. However, it is important to separate the CPI numbers into Total CPI and CPI excluding food and energy. A study of our CPI chart (click here) is needed. CPI-ex-energy is relatively flat. The CPI was driven higher by rising oil prices, which were driven higher by a falling Dollar. It is not yet time to start worrying about inflation. Any extraction of liquidity (see below) or increase in interest rates will lower oil prices (in Dollars) faster than they will increase consumer prices, thus keeping the CPI number in check. Of course, inflation caused by our weak Dollar is a real concern.
Housing Starts remain weak as excess inventory remains high. The $8000 home buyer tax credit is helping to clear the excess inventory, but discriminates against new home builders, who cannot build a new home quickly enough to meet the tax credit expiration date. We expect housing to remain weak-to-flat for many months, as the inventory will remain high due to impending foreclosures. A recent report by TransUnion revealed that 6.25% of all home mortgages (10.2% in California, 14.5% in Nevada) are at least 60 days past due. This is the first sign of potential foreclosure, as homeowners have a difficult time making up more than one delinquent payment. This delinquency ratio has increased for 11 straight quarters, so we do not expect the inventory to clear anytime soon.
Nov 16, 2009 Update: S&P500 1111. Lost because of the new Retail Sales numbers released today (see below), new Money Supply figures slid under the radar, showing yet another large increase in the Monetary Base. When studying our Money Supply Chart, one notices that the Monetary Base is up 72% over October 2008, which was up 32% over October 2007. These are GIGANTIC increases in the Money Supply. The Monetary Base is up an astounding 130% in the last 14 months (just before Lehman Brothers filed for bankruptcy). This is unprecedented, and is the cause of the dramatic fall in the US Dollar and rise in the price of gold. The Federal Reserve has essentially doubled the currency in circulation via the printing press. These recent numbers show the Fed is still quite troubled with the state of the US economy. While the growth in the Money Supply has headed off a full-blown depression, one must remember that the extra liquidity must be withdrawn again in the near future, lest we have a collapse of the Dollar and unprecedented inflation. We should expect economic growth ahead, but tempered by the extraction of liquidity that follows. We trust that Ben Bernanke, a student of the Great Depression, will properly throttle the Money Supply, moderating both growth and inflation.
Nov 16, 2009 Update: S&P500 1111. Today's Retail Sales numbers contain a bit of a head fake, and it is important to dig a little deeper into the numbers. First, the headlines today proclaim that Retail Sales rose an unexpected 1.4% in October, higher than the 1.0-1.2% expected. What the headlines don't tell you is that the Commerce Department revised the September numbers downward, making the new October number look better. The revisions can be traced to revisions of the Auto Sales figures from the Cash for Clunkers fiasco*. Auto Sales were revised upwards for August (during CfC) and downward for Sept (post CfC), matching the overall revisions. Last month, we were told Retail Sales fell by 1.5% for September. Today's revisions show that Retail Sales actually fell 2.3% in September. This makes October number look better than they would have without those Auto Sales revisions. Without the revisions, October Retail Sales would have risen a less-than-expected 0.8%, instead of today's better-than-expected 1.4%. Most importantly, properly analyzing the numbers, Retail Sales excluding Autos rose by only 0.2%, half the expected 0.4% increase. Bottom line: Retail Sales are generally weak but rising, up an average of 0.5% per month since July, but still down 8.5% from their peak in November, 2007. Retail Sales are slowly recovering:
Click Here for Current Retail Sales Chart.
*As many of you know, CrystalBull.com views the Cash for Clunkers program as a blunder. Setting aside the poor implementation and execution, the CfC program essentially robbed from future sales, and pushed them forward into August 2009, at a time when dealer inventories were at a historic low. Without inventory, Auto Sales in September and October were bound to be lower than they otherwise would have been. The program was structured so that it primarily helped the foreign automakers, at the expense of the American companies. The big winners were the Korean automakers (Hyundai: up 47% in August and 27% in September, Kia up 60% in August), then the Japanese. In fact, of the big 3 American automakers, only Ford showed increased auto sales (up 17% in August, then lost the gains in September). The CfC program actually hurt the 2 bailed-out automakers it was intended to help: GM (down 20% in Aug., at the peak of CfC, and down more than 50% in Sept.) and Chrysler (down 15% in Aug. and down 50% in Sept.).
Oct 30, 2009 Update: S&P500 1036. Further to the volatility issue: Yesterday, the GDP numbers pronounced the end of the recession, and the market staged a very strong rally. Today, the Personal Income numbers were flat (after being revised downward for the last 2 months), and the University of Michigan's Consumer Sentiment numbers were very weak. The market sold off. Those who try to trade this market based on guesses are bound to get hurt. The CrystalBull Trend Indicator remains bullish. The CrystalBull Trading Indicator has returned 64.9% YTD, which trounces the S&P 500 YTD return of 17.5%.
Oct 26, 2009 Update: S&P500 1000. The current data show a highly unstable market, with volatile price swings. The CrystalBull Trading Indicator thrives in a volatile market, but traders should be aware that trades may occur more frequently than when the market is more stable.
Aug 20, 2009 Update: S&P500 1005. Introducing the all-new CrystalBull.com Trading Indicator!
Due to popular demand, we have added more dynamic data to our Trading Indicator. Since 08/1996, this model has outperformed the S&P500 by over 600%, and with great consistency! It has averaged just one round turn trade per month.
Click here to see the Historical Performance of the CrystalBull Trading Indicator
July 31, 2009 Update: S&P500 987. Some important notes about today's GDP release. First, the BEA has made many changes to the way national income and product accounts are calculated. Thus, figures since 2002 have been revised. Also, the chained figures (real, adjusted for inflation) which were chained to 2002 dollars, now are chained to 2005 dollars. That is an interesting event, and we are studying its ramifications. This occurs about every 5 years, so there is nothing sinister here; It just moves the benchmarks slightly. Those following GDP should take the time to study the latest Real GDP Chart.
Important to note is that previous GDP figures have been adjusted downward. As we all know, the US economy has been is severe recession. Preliminary Q2 figures show that Q2 was slightly worse than Q1, but only by 1.03% annualized. That is a sign of a bottoming in the recession, thus today's stock market rally. While our current economy is not robust, don't be surprised if the Q3 GDP is higher than Q2. That would technically be the end of the recession, but employers would need to start adding jobs before we start to see real strength.
Watch our Stock Market Trend Indicator, as it just came back into positive territory. It has been a terrific leading indicator of the long term trend.
Three short-term indicators (CBRSI, MACD, Trading Indicator) all remain out of the market, while the long-term Trend Indicator has just given an oversold signal. We interpret that, while the long-term outlook is positive, a short-term correction may be imminent, and the model will go 100% back into the market when the next short-term oversold signal occurs (correction).
< Recent Commentary available to Subscribers only.>
Older Commentary:
December 31, 2011 Is Buy-and-Hold dead? For 2011, the S&P500 ended almost exactly where it started, losing 4 cents, from 1257.64 to 1257.60. That's rather amazing, considering all the gyrations, chaos, panic, and confusion during the year.
Most pundits fail to account for dividends, though, which will come in near the 2% mark for the year. So, total return will be very near 2% for 2011.
Here's to a healthy, happy, and profitable 2012!
November 2, 2011 During testing for our mid-year model update, we were unable to find any significant improvement over our current model. That leads us to believe we are still on the right track. While we were hoping that new data points from this wildly-volatile market would give us some updates, none were found. We tested many points where data bumped up against limits, and did not find any reason to move the limits we had already set. We continue to test, but so far, so good. We are pleased with the model and its performance to date.
August 5, 2011 Update: S&P500 1200. Several subscribers have asked why the Trading Indicator failed to anticipate the recent market selloff. Just to recap: On July 21, the Trading Indicator issued an intraday overbought alert at S&P 1343.55. The market began its descent from there. As the market descended, the Indicator moved away from its overbought position, and was no longer in overbought territory by the end of the day. Those who sold near 1343 exited the market near its recent high. The official model, which is based only on reading at the close each day, remained in the market. The performance numbers shown on the site reflect the model's acting only on closing data, so do not reflect the July 21 overbought intraday signal.
The Trading Indicator reentered oversold territory on July 28th, near the S&P 1300 level. From there, the market continued its slide.
Even with the benefit of hindsight, we still are not sure why the market has fallen so dramatically. Most of the news (US debt ceiling negotiations, foreign debt crises, weak GDP, weak employment numbers, etc.) have been known for some time. This appears to have just been a "perfect storm", where all events came together, and caused a selling panic.
When the US Bureau of Economic Analysis revised previous GDP numbers downward, it exposed the US economy as much weaker than commonly believed, much weaker than US politicians have been propagandizing. It reminded us of the famous Warren Buffet quotation, "It's only when the tide goes out that you learn who's been swimming naked." Please click this link: Real GDP Chart to view the recent revisions. After the revisions, Real GDP appears to be falling again, and was dangerously close to entering negative growth in the first quarter (just 0.36% growth, annualized). If this pattern continues, a double-dip recession is on the horizon. One must keep in mind that the Federal Reserve's QE2 has ended, that stimulus spending is waning, and that the US government has just committed to an austerity program, with reductions in spending growth (not spending cuts!) ahead. While healthy for the US economy long-term, this certainly does not bode well for short-term economic growth.
Nothing in our Trading Indicator model could have foreseen this confluence of events. All we can do is to move forward, trying to capture new gains.
March 25, 2011 Subscribers have asked why the Trading Indicator appears to be stuck at the same reading since yesterday. The Indicator is correct, but we wanted to explain why it has not moved. One of the inputs is up against a limit. This is seldom-entered territory, but from our historical back-testing, this is the proper reading for the Trading Indicator. (NOTE: there really aren't a comfortable number of data points for this limit in history, but from the few that we have, the indicator should be where it is. It is nice to have this limit again to test. In our next update, we can adjust for market behavior during this rare situation.)
February 7, 2011 As of Friday, the CrystalBull.com Trading Indicator was outperforming the S&P 500 by 0.3% YTD, and the model issued an overbought signal. With today's runup, the S&P500 will have pulled back ahead, marginally. This demonstrates just how difficult it is to outperform an index during times of such strength, when trading only that same index in a long-only model. Simply matching those strong returns is a feat in itself. For several months, the market has been heading higher, almost in a straight line. We are comfortable in simply staying even with the market during such a runup.
February 7, 2011 Our end-of-year model update is done and installed. To get an idea about how the update changed the model, we decided to provide the new results by updating the August 8, 2010 message below. There, you can see the year-by-year performance of the previous model to the current update. While most years had very minor performance changes vis-a-vis the old model, the overall performance increased slightly. What is comforting to know is that, while another half-year has been added to market history, no major changes were necessary. This leads us to believe that we are on the right track. As history unfolds, we will continue to fine-tune the model. Thus, the word "Seeking" in our tag line: "Seeking to build the world's most accurate stock market timing model!"
August 8, 2010, updated February 7, 2011 Our mid-year update is here, and it has been worth the wait! During the last few months, we have made several discoveries in the data that have greatly improved the accuracy of the Trading Indicator. The trading results and consistency of the updated formula are almost hard to believe. Yes, the formula is complex, but still elegant, and produced incredible results. Since 1/1/96, using a long-only trading system, the CrystalBull Trading Indicator would have outperformed the market by over 100x! It beat the market 12 of the 15 years, usually by wide margins, and never had a down year. Click here to see the historical performance of the updated CrystalBull Trading Indicator. Here is a table of year-to-year results:
| Year | S&P500 | CrystalBull (08/10 update) | CrystalBull (02/11 update) |
| 1996 | 21.83% | 11.92% | 11.07% |
| 1997 | 33.24% | 26.90% | 26.93% |
| 1998 | 28.45% | 69.85% | 69.85% |
| 1999 | 20.97% | 50.06% | 50.07% |
| 2000 | -9.12% | 54.22% | 54.18% |
| 2001 | -11.88% | 55.50% | 55.51% |
| 2002 | -22.09% | 29.56% | 29.63% |
| 2003 | 28.49% | 44.83% | 45.08% |
| 2004 | 10.75% | 4.63% | 4.38% |
| 2005 | 4.78% | 12.61% | 12.09% |
| 2006 | 15.62% | 22.06% | 22.09% |
| 2007 | 5.36% | 16.60% | 17.27% |
| 2008 | -36.95% | 87.14% | 81.33% |
| 2009 | 26.64% | 94.04% | 97.9% |
| 2010 | 14.95% | 29.21% | 33.43% |
We are amazed at the consistency of the model, and its ability to find the turning points. That is exactly what we look for in a market timing model. What is impressive is how well the model thrives in times of high volatility. When you see the historical performance in a linear chart, it is truly striking.
Here is the historical performance in linear form (remember, the formula does not change in 2008, but the volatility and volume do):
Market timing model historical chart, linear format.
We are looking forward to watching what the new model does going forward. We hope you are as excited as we are about the updated CrystalBull Trading Indicator!
May 6, 2010 Update: S&P500 1128. Today was one to remember, and well highlighted the effects of panic and tumult (emotions) in the stock market. The market has been selling off recently, due to the economic crisis in the Eurozone. At around 2:30 PM EST, some program trades kicked in, the information system broke down, and the market plunged nearly 6% within 15 minutes. It is rumored that a large trader inadvertently entered his order in "billions" instead of "millions", causing quite a sizable downtick. Quotation systems went down, fueling the panic. Even Yahoo Finance and Bloomberg, public sites that are built to handle large volumes of simultaneous traffic, were inaccessible. We watched as quotations came in on the Dow 30 at -300, -400, -600, -700, -900, -1000 within minutes, then quickly recovered. At one point, the S&P 500 was down over 100 points. That was an almost unbelievable drop. Today's selloff was caused, not by any breakdown in fundamentals, but by a breakdown in information! If you want to get an idea of what this was like in real time, here is a great video clip from CNBC, while the panic was happening. Jim Cramer astutely called the information "apocryphal":
CNBC market crash video
While we could sense a correction coming, the market seemed to keep shrugging it off, rising to recent new highs in light of the information coming in from the Eurozone. We had hoped that the model would be out of the market when the correction came. But, alas, the model issued an oversold signal after the April 27th correction, and did not find an exit point since that date. Today, the Trading Indicator remains in "Oversold" territory. This means that the model is expecting a short-term runup to the next exit point, where we can take a breather. One of the benefits of the CrystalBull.com Trading Indicator is that it is out of the market about one-half of the time, meaning its risk of being in the market during such a Black Swan event is cut in half. Unfortunately, this time the event occurred while we were in the market. So, our gains for 2010 have been erased. Fortunately, we have lost less than 1% YTD, and we hope to recover that quickly.
Apr 2, 2010 Update: S&P500 1178. Today, the U.S. Bureau of Labor Statistics released its monthly Employment Situation report, showing that nonfarm employers added 162,000 jobs in March. This is rather close to what the consensus estimates were. Any increase in jobs is good news in this environment, but we have a long way to go to recover the millions of jobs lost in 2008-09. This New Jobs Chart clearly shows the jobs trend has improved, but the US really needs several months of 250,000+ new jobs added before the unemployment picture starts to strengthen. We remain at a 9.7% Unemployment rate [chart], not including the "underemployed".
Analyzing the new jobs figures, we see that, in the 162,000 jobs added, 48,000 were temporary workers hired by the U.S. Census, and another 40,200 were added by private-sector temp agencies. 45,000 were added in the private Education and health services sector, which is a growing field. Subtracting out the temporary jobs added, one can see that employment is rather flat, and improving very slowly. This is consistent with the jobless recovery we have been forecasting. The U.S. really needs a "next big thing" to get all the underemployed working again. Will it be in energy? Health care? Or, will the U.S. slowly transform into a stagnant service economy? Stay tuned.
The U.S. stock markets are closed today, but the futures market likes today's news. If we get a few days of pushing the S&P 500 higher, we may get another nice exit point.
Mar 29, 2010 Update: S&P500 1173. There is an interesting article in the New York Times today, titled Stocks Soar, but Many Analysts Ask Why. It echoes something we've been noticing for several weeks: that the market has been surprisingly strong, shrugging off each day's negative news. Many widely-used technical indicators have failed during this period. This proves just how difficult our endeavor is. It is very difficult to beat a market that continues to rise through adversity. Where the CrystalBull Trading Indicator shines is during periods of market weakness, when it exits the market. Of course, the idea is to be in the market during periods of strength; that is where the gains are made. But the gains are preserved by exiting the market preceding times of weakness. The Trading Indicator correctly picked overbought signals on January 11th and February 2nd, but did not find a good time to re-enter the market since early February. The market appeared poised for a correction.
This brings us to a very important point in choosing and using a market timing or trading system. Our purpose is to remove the emotions and guesses from buying and selling decisions. It is nearly impossible for a trader to guess correctly on any consistent basis, and emotional decisions usually prove to be wrong. Knowing the strength of the algorithm we use in the CrystalBull.com Trading Indicator, we have every confidence that it will outperform the market in the long run. But, there is a lot of noise and chaos in the stock market. Thus, even a trading system with a 90% probability of beating the market over the long run, may have only a 60% probability of beating the market in any given month.
So, we continue to hang in there. We expect the last few weeks to prove to be an anomaly in a historically great timing model.
Mar 29, 2010 Update: S&P500 1173. Today's new Personal Income data tell the story of the current US economy in a nutshell. Here are the year-over-year (Feb2010/Feb2009) changes in the personal income components. Bear in mind that the US population increased by 0.9% during this period, and these figures are the aggregate of the entire population:
- Private-industry wages: -0.6%, but starting to trend higher again.
- Government employee wages: +2.3%, and continuing on upward trend.
- Proprietors' income: +1.9%, but flattening out.
- Rental income: +19%. (This is a number that does not get reported in the press.)
- Dividend income: -11.6%
- Social Security benefits: +5.3%, and trending higher.
- Unemployment benefits: +54.4%, but flattening out.
- Other government social benefits: +18.2%, and growing.
- Personal Consumption Expenditures: +3.4%
- Personal interest payments: -9.6%
- Personal taxes paid: -5.3%
Next up... The New Jobs report will be issued Friday. We are not expecting any real surprise in the number, but the survey has a wide margin of error. The markets will be closed Friday, but look for Monday to be interesting if the number varies to any great extent from the consensus estimate..
Mar 1, 2010 Update: S&P500 1114. As we pour through today's Personal Income data, here are a few insights:
- The Bureau of Economic Analysis has revised the Personal Income data going back to July, 2009. All months were revised downward, indicating the recovery in Personal Income was not as strong as previously indicated. In fact, Real Disposable Income has now turned negative, and is trending downward. This is deflationary. Nominal Personal Income (not adjusted for inflation), however, has turned positive year-over-year, and is trending higher. This is inflationary. What to make of this? Modest stagflation, jobless recovery, continuing trend. This is not a pretty picture for those under-employed or unemployed. We have prepared this chart for subscribers showing the revisions graphically:
- Also, Personal Savings figures since July, 2009 have been revised downward by an average of over 12% from previously reported figures. Americans were spending more and saving less than previously reported. But Personal Savings still remains higher than in recent years, at about 3%. It is important to remember that the Personal Savings figures reported by the BEA do not include changes in the asset values of real estate or investment portfolios.
- Personal Income rose in both private and government wages, as well as private proprietorships. Farm income fell, as did personal interest and dividend income. Government social benefits continue to rise.
- While we're talking about revisions... On Friday, the National Association of Realtors released their January Existing Home Sales figures, and revised the previously reported data going back several years.
Tuesday's Overbought signal was tough to swallow. The market was climbing like a rocket, and the pundits were bullish. The CrystalBull.com Trading Indicator exited the market, while the herd lost nearly 3% in 2 days. Tune out the noise. We all can use a little more free time and less stress in our lives.
The headlines from last week's Personal Income data were all positive: "Personal Income UP, Disposable P.I. UP, Savings rate UP." But digging into the data reveals some important trends. Yes, private industry wages were up 0.1%. (Remember that there has been a large amount of government stimulus spending.) But government employee wages were up 0.24%, and government social benefits were up 0.65%. Couple this with the fact that social insurance contributions rose only 0.08%, and Personal Taxes actually fell 0.13%, and you can see that this is unsustainable deficit spending. (Also, a head-scratcher in the data is that private farm income nearly doubled from September to December. If you have an explanation for that, please email us.)
Dec 23, 2009 Update: S&P500 1119. Personal Income numbers for November came out today. Just a few minor insights in this very important report. First, the headlines read that Personal Income rose 0.4%, while Personal Spending rose 0.5%. Those are slightly respectable, but nowhere near high enough to sustain a real economic recovery. Digging into the numbers, we see that the majority of the increases were in the following areas: 1) proprietors' income (both farm and non-farm business owners are doing well). 2) In the Employee wages section, we see that the majority of the increase was in the service sector. That is not surprising, but worth acknowledging. 3) Government wages were again higher. 4) Passive income (rentals, interest, dividends) made up much of the remaining increase. Manufacturing remains weak. Studying our Personal Income chart, it is difficult to call a recovery in the trend.
Dec 4, 2009 Update: S&P500 1098. A happier jobs report: job losses are slowing. But it should be tempered by the fact that 52,000 of the jobs created were temporary jobs. With new employment taxes and regulations pending in Congress, it is no wonder we are having a jobless recovery. Also important to note, the jobs losses for September and October were both revised, showing results better than previously reported. September had job losses 80,000 less than previously reported, while October had job losses 159,000 less than previously reported. So, as you study our New Jobs chart, you will see that the job market is turning around. That is an important trend of which an investor should be aware.
A little tidbit to tell your children/grandchildren: Unemployment rate among college graduates: 4.9%. High school graduates: 10.4%. Less than high school diploma: 15.0%. (Essentially 5, 10, 15%, depending on education.) Education is extremely valuable at all times, but really shines during a recession.
Nov 28, 2009 Update: S&P500 1091. Just a follow-up to this week's Personal Income numbers. It is puzzling that Personal Income would be within 1.5% of its 2008 high, as we have witnessed wages and employment fall across the board. So, we wanted to dig a little deeper into the numbers. First, we use real (adjusted for inflation) numbers in our Personal Income analysis. We have had a very modest 0.21% DEflation since May, 2008, so purchasing power per-dollar has actually increased slightly. And yes, wages and salaries have decreased since May, 2008, but there are some insights in the numbers:
In private industries, wages have decreased by 4.8% overall. While that is not a healthy sign, it is a smaller decrease than one might expect with the job losses, furloughs, and pay cuts we have witnessed. And this decline in private industry wages has been offset by INCREASES in government wages (+4.2%), Social Security payment increases(+10.3%), and unemployment benefits paid (+273.4%). Disposable Personal Income fared even better, as income taxes fell.
So, it appears that government deficit spending has filled in the gap in personal income. We thought that was interesting, and that our subscribers would as well. We will save the political diatribe for another day, but we wish the American media would dig into the numbers to paint a clearer picture.
Nov 25, 2009 Update: S&P500 1108. Very strong surprise in today's Personal Income numbers. The BEA announced Personal Income figures for October, and revised the PI numbers all the way back to April. The last 6 months' figures were revised upwards from approximately 0.5% to 1.25%. Those revisions were a surprise, and proclaim that the US consumer is in a much stronger financial position than one might expect. In fact, in REAL terms (adjusted for inflation), Personal Income is within 1.5% of its May 2008 high. Disposable Personal Income (actual buying power) is within 1.25% of its May 2008 high. This is remarkable in this environment.
Durable Goods orders remain very weak. Until consumers start spending again, Unemployment will remain high, and growth will be slow. We are seeing signs of the jobless recovery we have anticipated.
An interesting, non-partisan look at how Socialism has crept into American life: Stalin's America
Nov 18, 2009 Update: S&P500 1105. Some insights into today's data releases... First, the headline reads that Consumer Prices rose 0.3% for October (a 3.6% annual rate). At first, that certainly appears as if inflation is coming back. However, it is important to separate the CPI numbers into Total CPI and CPI excluding food and energy. A study of our CPI chart (click here) is needed. CPI-ex-energy is relatively flat. The CPI was driven higher by rising oil prices, which were driven higher by a falling Dollar. It is not yet time to start worrying about inflation. Any extraction of liquidity (see below) or increase in interest rates will lower oil prices (in Dollars) faster than they will increase consumer prices, thus keeping the CPI number in check. Of course, inflation caused by our weak Dollar is a real concern.
Housing Starts remain weak as excess inventory remains high. The $8000 home buyer tax credit is helping to clear the excess inventory, but discriminates against new home builders, who cannot build a new home quickly enough to meet the tax credit expiration date. We expect housing to remain weak-to-flat for many months, as the inventory will remain high due to impending foreclosures. A recent report by TransUnion revealed that 6.25% of all home mortgages (10.2% in California, 14.5% in Nevada) are at least 60 days past due. This is the first sign of potential foreclosure, as homeowners have a difficult time making up more than one delinquent payment. This delinquency ratio has increased for 11 straight quarters, so we do not expect the inventory to clear anytime soon.
Nov 16, 2009 Update: S&P500 1111. Lost because of the new Retail Sales numbers released today (see below), new Money Supply figures slid under the radar, showing yet another large increase in the Monetary Base. When studying our Money Supply Chart, one notices that the Monetary Base is up 72% over October 2008, which was up 32% over October 2007. These are GIGANTIC increases in the Money Supply. The Monetary Base is up an astounding 130% in the last 14 months (just before Lehman Brothers filed for bankruptcy). This is unprecedented, and is the cause of the dramatic fall in the US Dollar and rise in the price of gold. The Federal Reserve has essentially doubled the currency in circulation via the printing press. These recent numbers show the Fed is still quite troubled with the state of the US economy. While the growth in the Money Supply has headed off a full-blown depression, one must remember that the extra liquidity must be withdrawn again in the near future, lest we have a collapse of the Dollar and unprecedented inflation. We should expect economic growth ahead, but tempered by the extraction of liquidity that follows. We trust that Ben Bernanke, a student of the Great Depression, will properly throttle the Money Supply, moderating both growth and inflation.
Nov 16, 2009 Update: S&P500 1111. Today's Retail Sales numbers contain a bit of a head fake, and it is important to dig a little deeper into the numbers. First, the headlines today proclaim that Retail Sales rose an unexpected 1.4% in October, higher than the 1.0-1.2% expected. What the headlines don't tell you is that the Commerce Department revised the September numbers downward, making the new October number look better. The revisions can be traced to revisions of the Auto Sales figures from the Cash for Clunkers fiasco*. Auto Sales were revised upwards for August (during CfC) and downward for Sept (post CfC), matching the overall revisions. Last month, we were told Retail Sales fell by 1.5% for September. Today's revisions show that Retail Sales actually fell 2.3% in September. This makes October number look better than they would have without those Auto Sales revisions. Without the revisions, October Retail Sales would have risen a less-than-expected 0.8%, instead of today's better-than-expected 1.4%. Most importantly, properly analyzing the numbers, Retail Sales excluding Autos rose by only 0.2%, half the expected 0.4% increase. Bottom line: Retail Sales are generally weak but rising, up an average of 0.5% per month since July, but still down 8.5% from their peak in November, 2007. Retail Sales are slowly recovering:
Click Here for Current Retail Sales Chart.
*As many of you know, CrystalBull.com views the Cash for Clunkers program as a blunder. Setting aside the poor implementation and execution, the CfC program essentially robbed from future sales, and pushed them forward into August 2009, at a time when dealer inventories were at a historic low. Without inventory, Auto Sales in September and October were bound to be lower than they otherwise would have been. The program was structured so that it primarily helped the foreign automakers, at the expense of the American companies. The big winners were the Korean automakers (Hyundai: up 47% in August and 27% in September, Kia up 60% in August), then the Japanese. In fact, of the big 3 American automakers, only Ford showed increased auto sales (up 17% in August, then lost the gains in September). The CfC program actually hurt the 2 bailed-out automakers it was intended to help: GM (down 20% in Aug., at the peak of CfC, and down more than 50% in Sept.) and Chrysler (down 15% in Aug. and down 50% in Sept.).
Oct 30, 2009 Update: S&P500 1036. Further to the volatility issue: Yesterday, the GDP numbers pronounced the end of the recession, and the market staged a very strong rally. Today, the Personal Income numbers were flat (after being revised downward for the last 2 months), and the University of Michigan's Consumer Sentiment numbers were very weak. The market sold off. Those who try to trade this market based on guesses are bound to get hurt. The CrystalBull Trend Indicator remains bullish. The CrystalBull Trading Indicator has returned 64.9% YTD, which trounces the S&P 500 YTD return of 17.5%.
Oct 26, 2009 Update: S&P500 1000. The current data show a highly unstable market, with volatile price swings. The CrystalBull Trading Indicator thrives in a volatile market, but traders should be aware that trades may occur more frequently than when the market is more stable.
Aug 20, 2009 Update: S&P500 1005. Introducing the all-new CrystalBull.com Trading Indicator!
Due to popular demand, we have added more dynamic data to our Trading Indicator. Since 08/1996, this model has outperformed the S&P500 by over 600%, and with great consistency! It has averaged just one round turn trade per month.
Click here to see the Historical Performance of the CrystalBull Trading Indicator
July 31, 2009 Update: S&P500 987. Some important notes about today's GDP release. First, the BEA has made many changes to the way national income and product accounts are calculated. Thus, figures since 2002 have been revised. Also, the chained figures (real, adjusted for inflation) which were chained to 2002 dollars, now are chained to 2005 dollars. That is an interesting event, and we are studying its ramifications. This occurs about every 5 years, so there is nothing sinister here; It just moves the benchmarks slightly. Those following GDP should take the time to study the latest Real GDP Chart.
Important to note is that previous GDP figures have been adjusted downward. As we all know, the US economy has been is severe recession. Preliminary Q2 figures show that Q2 was slightly worse than Q1, but only by 1.03% annualized. That is a sign of a bottoming in the recession, thus today's stock market rally. While our current economy is not robust, don't be surprised if the Q3 GDP is higher than Q2. That would technically be the end of the recession, but employers would need to start adding jobs before we start to see real strength.
Watch our Stock Market Trend Indicator, as it just came back into positive territory. It has been a terrific leading indicator of the long term trend.
Three short-term indicators (CBRSI, MACD, Trading Indicator) all remain out of the market, while the long-term Trend Indicator has just given an oversold signal. We interpret that, while the long-term outlook is positive, a short-term correction may be imminent, and the model will go 100% back into the market when the next short-term oversold signal occurs (correction).