SPX Metrics HDGE 5.23.17

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EOM Technical and Trading:  SPX Metrics  HDGE  5.23.17

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The goal of this “new” series is audit the current ‘Big Five” market cap stocks to determine if “Simple Simon, Sell Signals are visible.”  If so, we can use SS Sell signals for when to take (Bull play) profits and possibly dance with the Bears.  

Some Garden Growing candidates are nearing Simple Simon buy signals.  Although tempting, I am waiting for at least a 5-7% SPX and retracement before entering.

For those wanting to enter the market at these levels, take a look at the current SPX valuation metrics.  From Bank of America: based on the 20 most widely used valuation metrics, the S&P remains significantly overvalued on 18 of 20 valuation metrics, the only exceptions being free cash flow, helped by depressed capex), and relative to bonds, whole yields are depressed thanks to $18 trillion in global central bank purchases. The complete story from Zero Hedge.com.

Concerning dancing with the Bears, let’s take a look at a popular Bear Fund (HDGE) considered to be a quality “market downside” play.

Key Points…

A.   When SPX dropped 6.2%, HDGE ran 9%

B.   When SPX ran 6.7%, HDGE dropped 5.7%

C.   When SPX ran 4.2%, HDGE ran 7.7%

D.   HDGE does not trade with inverse to the SPX 100%

E.    HDGE does not pay a dividend

Action Points…

1.    Since HDGE does not trade consistently with an inverse correlation to the SPX, I would NOT consider it as a viable candidate for downside market action.

The rest of the week, we will analyze the current Big Five to know when to take profits and put on our “Bear Suits.”

When complete, we will update our All-Star A&B and High Dividend CEF candidate plays.


Enjoy your day!

David O. England 

Plan your work, work your plan, and share your harvest! 1 Timothy 2:1-2

This information is for Educational purposes only. It shall in no event be construed or interpreted as an offer or recommendation to buy or sell securities of any kind.

DAVID O. ENGLAND is the founder of the Eye on the Market-Training Academy and Associate Professor Emeritus of Finance. This column is presented for educational purposes only and not intended as financial advice.

If you have a question or comment, contact David England at eyeonthemarket@outlook.com


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