The Chaikin Power Gauge gives us an idea of how an individual equity is likely to perform vs. the market in the coming months. When we consider the aggregate PG ratings of stocks in the various sector ETF's that make up the US economy, we get a sense of what sectors are likely to fall into favor with institutions and, because Big Money IS the market, a sense of where we're headed in the next stage in the business cycle. Aggregate Power Gauge ratings represent the sum of fundamental and technical factors that drive institutional trading decisions. Following institutional traders and emphasizing strength in the market can make a big difference in how we manage our portfolio and the results we generate..
When stock and commodity prices fall and defensive sectors like Healthcare (XLV), Utilities (XLU) and Consumer Staples (XLP) show strength compared to the overall market, that can signal a transition from last vestiges of economic expansion to the first stages of economic contraction. But distortions, such as the Fed, jobs, housing prices, overseas markets and the strength of the US Dollar make it difficult to take e comfort in linear extrapolations. Markets simply don't move that way. Fortunately, I have Chaikin analytics to simplify economic reality just enough for me to action, but without ever dumbing things down. Remember, the Power Gauge is predictive in nature, but not necessarily a definitive measure of current reality. I liken it to a 3 - 6 month "heads up" about what's likely to come next. It gives me a road map of, in the famous words of Wayne Gretzky, where the puck is headed.
When stock and commodity prices fall and defensive sectors like Healthcare (XLV), Utilities (XLU) and Consumer Staples (XLP) show strength compared to the overall market, that can signal a transition from last vestiges of economic expansion to the first stages of economic contraction. But distortions, such as the Fed, jobs, housing prices, overseas markets and the strength of the US Dollar make it difficult to take e comfort in linear extrapolations. Markets simply don't move that way. Fortunately, I have Chaikin analytics to simplify economic reality just enough for me to action, but without ever dumbing things down. Remember, the Power Gauge is predictive in nature, but not necessarily a definitive measure of current reality. I liken it to a 3 - 6 month "heads up" about what's likely to come next. It gives me a road map of, in the famous words of Wayne Gretzky, where the puck is headed.
Favorable market Power Gauge ratings and technical patterns are what I require to make intermediate terms bullish bets. With lights flashing red on almost all fronts, I'm content to sit on my hands and avoid trending directional bets. I'm trading in the short term, and more to the downside than the reverse. Next week, we'll turn our attention to short terms speculative earnings trades, while keeping a wary eye on a suddenly volatile stock market.
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