Investing/Trading Insights

Latest Market Projection

Projected changes in S&P 500 index as of the market close on 2/8/10...

For elaboration, go to
Stock Market Status.

Site Sections

Blog - Investing Notes records financial markets analyses and insights (not transient news) from an investor/trader perspective. Many entries are summaries of academic papers. Normal update schedule is most trading days. The list in the header above offers short-cuts to topical cross-sections of the blog archives.

Guru Grades offers a summary of the accuracies of various experts in predicting the behavior of the U.S. stock market, along with supporting notes and links to detailed evaluations. Normal update schedule is as required for minor updates and approximately monthly for grading.

Stock Market Status provides the current projections of our stock market models. Normal update schedule is monthly.

Real Earnings Yield Model presents the Real Earnings Yield Model of the stock market. Normal update schedule is as required for revisions.

Reversion-to-Value Model describes the Reversion-to-Value Model of the stock market. Normal update schedule is as required for revisions.

Earnings Forecast provides a projection of aggregate S&P 500 operating earnings over the next few quarters. Normal update schedule is at least every quarter to incorporate new actual earnings data.

Inflation Forecast provides a projection of the 12-month trailing inflation rate by month for the next year. Normal update schedule is monthly to incorporate new data.

Trading Calendar provides typical full-year and monthly performance of the stock market (S&P 500 index) based on its average behavior since 1950 and 1990. Normal update schedule is monthly to incorporate new data.

What Works Best? is a best guess effort to identify the kinds of investing strategies that might work best for individual investors. This section has no regular update schedule.

Investing Demons synthesizes a wide range of research in a big-picture overview of financial markets investing and trading. This section has no regular update schedule.

Strategy Test describes and tracks the performance of an investment strategy that combines several potentially exploitable stock market premiums/anomalies. Normal update schedule is as required based on activity, and monthly to record performance.

Cartoons highlights those blog entries that have original cartoons that reinforce investment concepts and issues. This section has no regular update schedule.

About provides some background information on CXOadvisory.com. This section has no regular update schedule.

Latest Blog Entry

February 9, 2010 - ETF Pair Trading Based on Relative Returns/Volatilities

Does pairs trading work for exchange-traded funds (ETF)? In their January 2010 paper entitled "Pairwise Asset Rotation Trading and Market Timing: An Anatomy to a New Trading Strategy", Panagiotis Schizas and Dimitrios Thomakos present a market timing strategy based on transforming the predictability of relative returns/volatilities between pairs of ETFs into weekly trading signals via simple rules. They choose S&P Depository Receipts (SPY), the Financial Sector Select SPDR (XLF), PowerShares QQQ (QQQQ) and Oil Services HOLDRs (OIH) to investigate three pairs: SPY-XLF, SPY-QQQQ and SPY-OIH. For robustness, they consider weeks ending on Monday, Wednesday and Friday (for a total of nine pair-endpoint combinations). They devise four trading models based on relative pair returns, relative pair (realized) volatilities and more complex characterizations of relative pair performance. Relative return/volatility predictions derive from a rolling historical window of 104 weeks. Using daily open-high-low-close prices for SPY, XLF, QQQQ and OIH to construct weekly metrics from earliest availability through April 4, 2008, they conclude that:

For the full blog, go to
Blog - Investing Notes.

Recent Guru Forecasts

2/8/10 - John Hussman: ...fully hedged. ...It's not impossible that this clearing phase is complete, but it would be uncharacteristic, particularly since we've seen a lot of technical breakdowns, and our broad measures of market internals are negative. ...presently we are holding on tightly.

2/7/10 - Bill Cara: Early on in the week, I am anticipating a bit of strength, but I also think that the buying will move prices into the gunsights of traders waiting to hit the bids to offload stock positions...

2/5/10 - Bill Fleckenstein: I suspect that after this "correction" has passed, we could easily see a failing rally instead of new highs, but it's difficult to hold a big opinion.

2/5/10 - Carl Swenlin: ...the correction has a way to go.

2/4/10 - Comstock Partners: ...the market rally off the March bottom is over and that a major downturn is in store.

2/4/10 - Jason Kelly: ...the market is hitting a rough patch here, and that it would be wise to guard profits...

2/3/10 - Marc Faber: "In the near term, should stock markets – following a brief rebound in the first few days of February – decline into the second half of February, I would buy some stocks for a rebound. And if stocks now fail to decline and continue to rally right away I would use strength to lighten up positions."

2/3/10 - Gary Kaltbaum: ...bounces are to be sold instead of pullbacks being bought. I do believe the tide has turned and that won't change easily.

2/3/10 - Bernie Schaeffer: ...this consensus bearish view of the U.S. stock market is counter-trend, which makes it all the more remarkable and all the more actionable from a contrarian standpoint. ...investors should take comfort...

2/1/10 - Bob Brinker: ...his market timing model is bullish and his model portfolios are fully invested... "Our indicators suggest that a new cyclical bear market decline in excess of 20% is not likely to begin during the winter season. While...cyclical bull market corrections can occur at any time, we would regard any such pullback as a health restoring event..."

2/1/10 - Price Headley: ...the more likely downside target for the SPX remains around 1025/1030...

2/1/10 - Richard Russell: "...I think the Dow will violate first its November low and then its March low. ...It will be a full correction of the entire rise from the 2002 low of 7,286... If the Dow does not halt its decline at 7,286, I see it sinking down to...around Dow 1,000."

2/1/10 - Dennis Slothower: "...the bears have been rudely awakened from their winter hibernation and are in no mood to go back to sleep. They sound hungry." ...He's 100% in cash.

2/1/10 - Dan Sullivan: ...he is recommending that his followers be fully invested in the stock market...

1/29/10 - Carl Futia: ...I am expecting the correction to end today or Monday. I also expect to see the ES trade up above 1200 during the next couple of months.

1/29/10 - Don Luskin: So thank God for Ben Bernanke. He'll pull us through with zero interest rates… That should be enough to give stocks at least a moderately positive year, after we endure a healthy correction.

1/15/10 - Tim Wood: My cycles work tells me that there will be a rebound rally on both a short and an intermediate degree ahead.

1/28/10 - John Markman: ...the next stretch of activity for U.S. stocks is much more likely to resemble a restless snooze plagued by bad dreams than it is the easygoing stroll we've enjoyed since March of last year.

1/26/10 - Gary Halbert: All of this does not bode well for a continued rise in the stock markets...we could see stocks come under pressure just ahead, or simply move into a broad trading range.

1/25/10 - Louis Navellier: With some good earnings reports this week, and a strong GDP report on Friday, the market should turn up by week's end.

1/21/10 - Martin Goldberg: ...it is likely that there will be more correction to follow. ...it appears that the several day market correction has not hit bottom.

1/21/10 - Jeremy Grantham: ...it seems likely to go through 1200 and possibly higher. The market, however, is worth only 850 or so; thus, any advance from here will make it once again seriously overpriced… The real trap here, and a very old one at that, is to be seduced into buying equities...

1/21/10 - Jim Jubak: ...the odds that stocks will deliver the earnings needed to justify higher share prices look pretty good in the first half of 2010 and then decline as the second half progresses. ...by 2011, the chances that the stock market will get the precise balance it needs are almost nil.

1/21/10 - Robert Prechter: "2010 is the year when the bear market in stocks returns in full force. ...a meaningful close below [Dow] 10,489 should see a similar collapse to new bear market lows."

1/18/10 - James Dines: ...he's "intending to remain bullish for at least as long as the indicated uptrendlines remain intact. ...We are looking for a Top in 2010."

1/15/10 - John Mauldin: I would be very cautious about being long the stock market.