Low VIX, Nasdaq revs up and top cities for retirees
14 September 2004 09:12 pm GMT
AFX UK Focus
Copyright AFX News, 2004 All reproduction and presentation rights reserved.

Low Volatility Index readings concern many of the investment letter editors tracked by the Hulbert Financial Digest but low VIX readings, assumed to be bearish, don't always lead to below-average market returns, says Mark Hulbert.
Peter Brimelow says to keep an eye on the flattening yield curve and Michael Ashbaugh's charts show the Nasdaq is coming back to life. Meanwhile, Herb Greenberg says investors choose to ignore warnings and issues red flags to American Capital Strategies , NovaStar and Allied Capital . Also, Robert Powell names the top five cities for retirees.
In newsletter news, it appears that a couple of editors have allowed their own subjectivity to creep into their market timing strategies. Also, the Money Show comes to San Francisco.
Samantha Soga, Newsletters Assistant

NEWSLETTERS & RESEARCH

Volatile compounds
A number of the newsletter editors I monitor are worried that the VIX is too low. --
Eye on the curve
Could the flattening yield curve signal a problem? --
Nasdaq finally coming to life

Two timers

Newsletter editors often tout that their proprietary market timing systems are unclouded by emotion. Two newsletter editors, however, may be letting the taint of subjectivity creep into their readings.

Jack Schannep, editor of the Schannep Timing Indicator(& TheDowTheory.com Newsletter), decided to moderate the August sell signal issued by his newsletter by advising his subscribers to move their positions in the market from 100 percent invested to 75 percent invested. He had previously advised his subscribers that confirmation of a sell signal would lead him to advise a 50 percent invested position. Schannep writes that he adopted this lesser action because 'the odds do not assure a bear market.'

Schannep believes there is still a healthy yield curve, steady consumer confidence, and a favorable monetary atmosphere, and cites these as the main factors bolstering his continued optimism for the market. He also notes that his Schannep Timing Indicator's sell signals have not always been accurate at predicting a bear market in the past, and that the sell signal could constitute a 'bear trap.' Presumably, Schannep must feel that his caution has been vindicated by the market's recent upswing.

Similarly, Dow Theory Letters editor Richard Russell has remained steadfastly pessimistic in his editorials about the market despite the continued bullish readings from his daily Primary Trend Index (PTI) indicator. 'So far, the trend of the PTI remains bullish. As for me, I don't like this market, and therefore I'll pass on it,' Russell comments.

In a recent editorial, Russell elucidated his seemingly contrarian stance to his own indicator: 'Investing on the basis of the PTI is your choice. But don't ever invest against it. In other words, if the PTI is in a rising trend and above its moving average, it's your choice about buying stocks -- but never be short.'

But, Russell has not merely idled in cash and gold as per the latter part of the above advice, he also continues to write daily editorials mired in bearish gloom. Still, Russell is not shy about boosting his PTI at his own expense. 'The PTI is a lot smarter than I am,' Russell has often written. 'It's a great ego-deflator, as far as I'm concerned, and I've learned never to fight it.' --Ari Charney

The San Francisco Money Show

Stop by The Hulbert Financial Digest booth located in the exhibit hall lobby to chat with an analyst about newsletter performance ratings and attend the following seminars by Mark Hulbert:

--John Kimble

This story was supplied by CBSMarketWatch. For further information see www.cbsmarketwatch.com.

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