Quarter 1 is over and for now, we appear to be positioned in the right investments. Over the period our portfolio returned an impressive 9.1%1 compared to the FTSE 100’s 4.4%1.
This information is taken from The Big Picture, to download a sample copy please just click here.
1 28th March 2015. ISACO investment performance verified by Independent Executives Ltd.
Is the market healthy or unhealthy?
The way we use to check if the market is behaving as it should is to look at the trading action (price and volume activity) of institutional investors. Why do we do this? The stock market is about six month forward looking and its daily activity is the consensus conclusion whether institutional investors like or don’t like what they see happening down the road. By watching what the big players are doing (buying or selling) each and every day, it can provide essential clues to which way the market is likely to head.
It’s best to try to get ‘in sync’
Institutional investors control approximately 75% of the market’s future direction, which is why we aim to keep ‘in sync’ with them. If you don’t, it feels like trying to swim against a strong current. When you don’t get in sync, you often get hurt financially and that’s why we like to see if the 800-pound gorilla investors are buying, because when they do, it strengthens the market.
However, if they are selling, it weakens it. The other thing we like to keep a close eye on is the behaviour of leading stocks. If the markets best stocks are acting weaker than the generalaverages, it’s negative. However when leading stocks are outperforming the market, it’s positive.
Bull market? Bear market? Where are we?
Take a look at this 20-year chart of the NASDAQ Composite and you’ll see that the bull market that began in March 2009 (Point A) is six years old and for now remains intact.
Since the uptrend began, the NASDAQ Composite has made a very impressive return of 285.2%2. However, to make that gain it has had to experience three quite challenging corrections. The first (Point B) occurred from April to November 2010. The second (Point C) is a correction that started in May 2011 and ended in January 2012. The third (Point D), began in late March 2012 and finished March 2013. Since then we have had several retracement periods but none of them have been as severe as these three.
2 Performance data taken 26th March 2015. ISACO investment performance verified by Independent Executives Ltd.
NASDAQ drops for four consecutive days
On Friday the 27th of March we pointed out in the Daily Market Update that the NASDAQ had fallen for four straight days (Point E). We also said that two of them had been made in heavy trade (Point F) which is bearish activity.
We also commented…”It will be interesting to see from here whether the NASDAQ can hold around these present levels because yesterday’s ‘test’ of the support at its 50-day moving average was a success (Point G).”
Another comment we made was…
“The Composite’s intra-day low of 4826 is also worth mentioning because this price point happens to be above the further support around the 4811-4815 level (Point H).”
When we took a look at the NASDAQ Composite’s activity a week later (Friday the 3rd of April 2015), the NASDAQ had fallen six times over the previous nine sessions (Point I). This told us that the market had appeared to have started a new downtrend. Three of the falls over that time span had been made in heavy trade (Point J) which not ideal market activity. Drops in heavy volume signify distribution (institutional selling). However on the plus side, over its last six trading days, the NASDAQ had successfully found support three times at its all-important 50-day moving average (Point K).
We also said in Friday the 3rd of April’s Daily Market Update…
“If the Composite has just begun a new retracement period, and we see further falls from here, it will be interesting to see how it acts around the 4811-4815 level – a major level of support (Point L).”
This information is taken from The Big Picture, to download a sample copy please just click here.
As always, if you have any questions or thoughts on the points covered in this post, please leave a comment below or connect with us @ISACO_ on Twitter.
As we grow our wealth, you grow yours. Together we prosper.
ISACO are a specialist in ISA and SIPP investment and together with our clients have an estimated £75 million actively invested3. To help investors like you, we offer a high end service called ‘Shadow Investment’. Put simply, we invest and you invest beside us. As we grow our wealth, you grow yours.
How does Shadow Investment work?
Shadow Investment allows you to look over our shoulder and buy the same investments that we are buying. It’s an intensely personal service which gives you the opportunity to piggyback on our expertise and makes investing easier, simpler and much more enjoyable.
Delivering superior performance
We have an active investment strategy which aims to control risk and deliver superior performance. Over the last 17 years4, we’ve beaten the FTSE 100 by 77.9% and over the last 3 years5, we’ve made an average annual return of 9.5% versus the FTSE 100’s 5.7%.
Get in touch
If you have over £250,000 actively invested, click here to arrange a free financial review (valued at £495) with Paul Sutherland, ISACO’s Managing Director.
3 Internal estimation taken January 1st 2015 of total ISA and pension assets owned by the ISACO Investment Team and ISACO premium clients.4 December 31st 1997 - December 31st 2014 ISACO 105.5%, FTSE 100 27.6%.
5 December 31st 2011 – December 31st 2014.
ISACO investment performance verified by Independent Executives Ltd.
