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Friday, April 5, 2019

Late Innings

By Justin J. Kumar

To start April, stocks globally and in the US rose about 2%. We are seeing similar patterns throughout the world in both the developed and emerging markets. We see a Bull market continuation as we are still under a Global Buy, with our Core Indicators showing some incremental improvements. Our Universe Trend Indicator charts have both risen to the 50%, which shows some breadth gains and is very encouraging. The Cash Comparison finally added to its uptrend in Relative Strength for April to complement the Rate of Change move in March. Thus, we observe that stock returns are outpacing cash across various world markets. There was not enough movement in the Long Term Momentum indicator to improve to a Positive reading from Neutral, but since we are early in the cycle, we are not too concerned about this development. We would hope to see the LTM reading swing from Negative to Positive. This would lead us to believe that the current bullish trend is sustainable and that the market is presenting a good wealth-building opportunity. The Tactical Indicators remain in their Neutral states. We saw a reversal up in the 10-week, and the Overbought/Oversold Indicator has moved close to the Bull Trend Average as the MSCI All Country World Index has rallied off the 500-support level with an almost 3% move upward. We could be in the late innings of the more than 10-year rally, but as long as the underlying economic factors do not erode and favorable monetary policy returns, we would expect another push before a major selloff might take place.


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The Investor Education Institute (“IEI”) is not an investment adviser registered with the U.S. Securities and Exchange Commission or any state.  The IEI publishes financial publications of general and regular circulation that offer impersonal advice and disinterested commentary and analysis.

The IEI utilizes a Proactive Asset Allocation Model (“PAAM”) that is designed to provide insight into investing in today’s financial markets. PAAM utilizes quantitative-based buy, sell and reallocation indicators, selecting from US and global securities, in seeking to achieve attractive risk-adjusted returns over a long-term investment horizon. As with any investment strategy, IEI has in the past, and may in the future, modify this investment approach and parameters of PAAM in any manner which it believes is consistent with the strategy’s overall investment objective.  In that light, the following material modifications were made to PAAM: in February 2009 (creation of Universe Trend and Cash Comparison Indicators for trend analysis), June 2009 (creation of Long-Term Momentum Indicator for trend analysis), September 2009 (expanded Asset Class Ranking System and started computerized testing), December 2009 (creation of Global Indicator Set for buy and sell signals), April 2010 (inception of PAAM Computer Model), October 2010 (implementation of Tactical Indicators and Signals for short term risk management), January 2011 (modify Global Sell Signal with additional criteria including pattern determination), June 2011 (close Global Signals with stop loss criteria), September 2011 (inception of Long Only Model), May 2012 (modify Global Buy Signal wait period to enhance signal timing), October 2012 (first use of Stock Model), November 2012 (implement ETF replacement criteria), December 2012 (additional historical data for Cash Comparison Indicators), November 2015 (modify Global Buy Signal with additional criteria), June 2016 (modify Tactical Sell signal criteria), May 2018 (expanded Asset Class Ranking System, Tactical Asset Class Selling, Mini-Buy signal implementation); however, none of these changes modified the objectives or overall investment strategy of PAAM. Rather, as noted previously, IEI made these changes to seek to enhance the manner by which it runs PAAM, and thus each change, individually or in the aggregate, might have impacted the performance of PAAM (either positively or negatively, depending upon the efficacy of the changes(s)) after their implementation.  For more information regarding any of these material modifications, please contact IEI at 1-800-504-8505.

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