09/04/13   Limbo Season

Editor’s Corner

Ron Rowland

It’s limbo time, and we aren’t referring to the Caribbean dance where participants lean backward to pass under a pole.  However, some political pundits would proclaim that President Obama’s recent contortions regarding military actions in Syria are quite limboesque as he tries to avoid touching the pole of political fallout.  Today, we are going to use the non-dance and non-religious definition of limbo: “an uncertain period of awaiting a decision or resolution; an intermediate state or condition.”

Last week, as evidence mounted against Syrian President Assad, President Obama declared he was prepared to begin launching missiles immediately.  After U.K.’s Parliament voted against military action and some U.S. citizens voiced their displeasure, the president reversed course and said he would first seek authorization from Congress.  This process could take days or weeks, during which the status of U.S. military strikes against Syria remain in limbo.

Tapering of the Federal Reserve’s $85 billion in monthly bond purchases has been in limbo since May.  Recent consensus suggests the Fed could begin tapering operations later this month at its next FOMC meeting.  The September 18 post-meeting policy statement and press conference will be closely watched.

Remember the debt ceiling?  It’s back.  Latest estimates put mid-October as the time when the U.S. Treasury will hit its debt ceiling.  Both sides of the aisle appear to be digging in their heels for a fierce and extended fight.  Congressional leaders have had months to work out a plan, but this is expected to go down to the wire once again, leaving the debt ceiling in limbo for another six weeks.

We also had a little bit of limbo in the quote mechanics during trading today.  The Nasdaq added to its quote problems of a couple weeks ago with a six minute outage today, and the NYSE piled on with its own nine minute lapse.

Last, and also least, the season is in limbo.  Labor Day weekend and back-to-school define the “End of Summer” for most U.S. citizens.  For many, this week marks a period of new beginnings, surpassed in importance only by the annual rollover of the calendar year on January 1.  However, the autumnal equinox (for the northern hemisphere) doesn’t occur until September 22, marking the true end of summer and beginning of autumn.  Summer is now in limbo and will remain there for the next 18 days.

Investor Heat Map: 9/4/13


Technology held on to its first place ranking and even managed to post a gain for the week.  However, upside momentum is slowly evaporating for it and most other sectors.  Health Care, Consumer Discretionary, and Energy all climbed two spots and now hold the second through fourth place positions.  Their improvement was made possible by declines in Materials and Industrials, which slid down to occupy fifth and sixth respectively.  The bottom five categories are in downward trends and posting negative momentum larger in magnitude than a week ago.  Their relative order remains the same with Real Estate firmly entrenched in last place.


The quantity of negatively trending Style categories doubled since last week from two to four.  Additionally, Large Cap Growth is hugging the zero line and could easily be pushed either direction.  Market leadership still resides in the lower-right-hand corner of the Style Box.  Small Cap Growth and Micro Cap take top honors again, and their duopoly on control of the top is now entering its fourth month.  Mid Cap Growth and Small Cap Blend swapped places, but the change does little to alter the overall landscape.  Large Cap Growth edged into the top five, which now marks a clear market preference for Growth over Value.  In fact, all three Value categories are now in negative trends along with last place Mega Cap.


Just four Global categories are posting positive momentum scores today.  China had an impressive week, moving up from second place to take the top spot away from Europe.  Europe lost ground as both stocks and the euro came under pressure the past week when tensions in Syria escalated.  The U.K. held steady in third place and is now attempting to renew its rally.  Canada continues its slow climb up the rankings, not by displaying strength but by simply holding its ground the past few weeks.  EAFE, the U.S., and World Equity all flipped over to negative momentum.  If today’s upward moves prove to be sustainable, then all three could be back in positive territory by next week.  Pacific ex-Japan posted excellent results for the week boosted by strength in all its constituents except Singapore.  Japan slipped a notch, although it just posted a two-day rebound of better than 4%.  Positive spin for Latin America can be hard to find.  However, two things to keep in mind include the fact it found support this past week at its June and July lows and is now less risky than any other time in the past four years to establish a new position.


The charts above depict both the relative strength and absolute strength of various market sectors, styles, and geographic locations on an intermediate-term basis. Each grouping is sorted (top to bottom) by relative strength. The magnitude of the displayed RSM value is a measure of absolute strength, which is our proprietary method of measuring and reporting the intermediate-term strength as an annualized value.


“The task I’ve been given is to develop military options to deter – that is to say, change the regime’s calculus about the use of chemical weapons and degrade his ability to do so.”

General Martin Dempsey, Chairman of the Joint Chiefs of Staff, September 3, 2013


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