Another interesting chart. Ponders the question of “elasticity of demand” and how that impacts an “Aspirational Retailer” and can that be a leading indicator of broader economic swings.
In this case, I’m looking at M Macy’s for the last decade. How did it move, compared to SPY and other tickers, during the rise / bubble, during the collapse, and in the recovery to date?
The most “interesting bit” here is just how far “outside” the S&P 500 Macy’s ranges in good times vs bad times. It pretty much “calls the ball” on bubble and bust. Notice that it has “lower highs” before the SPY rolls over (2007 1/2 or so).
The copper ETF doesn’t begin until part way into the chart. But it still has enough history to show that copper is a lagging indicator / ticker on the drop, but looks to start a recovery a bit early. (not much though) At the time the Russel 2000 RUT reaches it’s prior highs in mid 2011 copper flats out and dips just a little.
Notice that on this long time scale, simply being “in” stocks when MACD is above the zero line and being “out” when it is below is a very simply and accurate timing indicator. Also notice that “exit on the 60 week or 300 day Simple Moving Average” is a reasonably accurate indicator (modulo the brief ‘dips’), but the ‘reentry’ needs to be closer to the faster 20 week (100 day) SMA line. (5 day trading weeks…) Looking at 2007 1/2, the RUT has “lower highs” a bit before the SPY does. So watching RUT lets you exit a bit more accurately. It also “runs up” a lot faster, so watch for it to separate “upside” on recovery calls.
It is also pretty clear that US Bonds TLT look overpriced (due to The Fed driving interest rates ‘crazy low’) while the Swiss Franc FXF has had a very nice preservation of value. The Yen rose nicely too, through most of it, until the end when the Bank Of Japan and Soros decided to knock it down. (A nice example of how Central Banks can screw up a nice currency and preservation of wealth strategy… never ever ever trust a central bank…)
It is hard to see on this graph, but during the “drop”, both currencies and bonds have a spike up as folks “run for cover” and do a “risk off” strategy.
This one shows it better. A 5 year chart, so everything is starting at the same “zero” just at the left edge.
SPY - S&P 500 US Benchmark TLT - Long duration US Bond fund RUT - Russel 2000 small cap ETF QQQQ - Nasdaq 100 Tech companies (heavy on AAPL Apple) JJC - Copper ETF FXY - Japanese Yen ETF FXE - Euro ETF FXF - Swiss Franc ETF M - Macy's (middle-upper retail)
The Yen was big in the “Carry trade” due to being near zero interest during the crash. You can see it spike up as folks shorting stocks stuck their cash in Yen. Watch the “carry trade” currency during crashes. Bonds spike up too. Both peak just a bit before the exact stock bottom. So you can use that to “call the bottom” a bit more precisely. (Folks have to exit the bonds and “carry trade” cash to buy the stocks at the bottom, so they have to show a sell down before the bottom in the thing being bought gets made.)
Interesting too is that both Copper and Macy’s have a parallel “higher lows” a bit before the broader market of SPY and RUT.
So these very long term charts are saying “stay in stocks” as MACD is above zero and tickers have not rolled over (yet). That’s on the years type of time scale. For tactical positioning (that is, trading inside a year) one moves to a faster daily chart. But for now, the bias stays “Be in stocks and out of bonds” but keep an eye on it. M is flat topping with highs about the same in the last couple and with copper not looking real strong.
Here are a couple of “live charts” just so folks can see what happens as things change over time. The first one, being weekly tick marks, will only change by one tick and take a week to do it, too.
A 2 year daily chart of the same tickers:
The “buy point” are those dips of RSI and where MACD has a flat just before a crossover from red on top to blue on top (when DMI is red on top). That is for “buy the dip in established up trend”. In established down trends, the rules are different… With RSI up near the top of it’s ‘wobble range’ and with MACD still ‘blue on top’ we are likely “near but not yet at” a roll over into a “dip”. So time to start edging for the door, but not a rush out. (So things like ‘stop loss orders’ where if you get sold out, you don’t care… or even buying puts as volatility is ‘way low’ right now so premium is low).
IF the thesis of this posing is correct, that M line ought to make a “lower high” at just about the peak time for SPY. That ought to be the “last call” for exit… “Ought” being the operative term. The market doesn’t repeat, but it rhymes…