About Faith Chaffee

Faith Chaffee is the Portfolio Specialist for Niemann Capital Management. Faith's role is to educate current Financial Advisors and their clients about how Niemann's investment methodology and unique brand of tactical money management can help them achieve their long-term investment goals. Faith began her investment industry career over 10 years ago. Before joining Niemann Capital Management in 2003, she served as a Private Equity Associate for Shott Capital Management, LLC, and has held several positions of increasing responsibility throughout her tenure with Niemann. Currently residing in Santa Cruz, California, Faith is a graduate of San Francisco State University with a degree in Business Administration, Finance. She currently holds FINRA Series 7, 63 and 65 licenses.

A Lot Goes On Behind the Scenes

Posted on May 4, 2012 by Faith Chaffee

Niemann Capital Management - A Lot Goes On Behind the Scenes In a May 3^rd article by James Armstrong of Traders Magazine entitled, “Narrowing Spreads for Illiquid ETFs,” the author details some of the pricing challenges traders face with illiquid ETFs. It takes years of trading experience, knowledge and strong relationships with different trading desks to receive better prices than what is frequently quoted. Often times our traders don’t take a quoted price on a screen at face value.

Liquidity does not show up in the prices posted for certain ETFs at times so we actively reach out to different trading desks to find liquidity and pricing that most retail clients don’t have access to. A lot goes on behind the scenes in our Trading/Analytics Dept. to make sure our clients get the best possible prices we can find.

An excerpt quoting our Senior Portfolio Manager is below:

“The only way to ensure tighter spreads is through competition. All ETFs go through an incubation process where spreads start out more than a dollar wide and eventually come down over time. If the fund is something a lot of people want to trade, spreads will come down quickly. If it’s more of a niche product, the process will take longer.

Alan Alpers - Niemann Capital Management

Alan Alpers, Senior Portfolio Manager

Alan Alpers, portfolio manager for Niemann Capital Management, a Scotts Valley, Calif.-based shop with $572.5 million in assets, said many market makers post wide spreads because they can’t be bothered to closely follow funds that rarely trade. Convincing them there is a live order out there, however, can lead to price improvement.

‘Once you wake them up, they tighten up the spreads a fair amount, and you end up getting reasonable prices on most things,’ Alpers said.

Niemann often works with WallachBeth to ensure it gets better prices than the quoted market. Alpers said he appreciates the anonymity of going through another firm, and getting a two-sided picture of bids and offers.

Though the firm primarily invests in ETFs, less than 5 percent of the funds it uses are difficult to trade. Niemann also tends to avoid the most illiquid names, screening out ETFs that trade fewer than 25,000 shares a day.”

To read the entire article, visit Traders Magazine: Narrowing Spreads for Illiquid ETFs

Overcoming the “Wall of Worry”

Posted on May 1, 2012 by Faith Chaffee

Technical Outlook

Equity markets continue their impressive recent run but resistance is closely overhead for many markets and volume continues to be lackluster. But as they say bull markets do need their “wall of worry” and sentiment levels are still somewhat cautious implying potential room to run. US markets still acting much better than most Int’l markets although some Pacific Rim countries are also performing strongly – Thailand and the Philippines in particular.

Markets

Stocks moved higher as good earnings reports prevailed over investors’ persistent worries about the European debt crisis, as well as some data suggesting a slowdown in the U.S. economic recovery. Markets started the week on a down note in reaction to a steep drop in European stocks, apparently prompted by the dissolution of the Dutch government over the weekend in response to dissatisfaction with austerity measures. Investors also seemed concerned about the strong showing of French socialist candidate François Hollande in the first round of the country’s presidential voting. Some worry that Hollande will not cooperate with German Chancellor Angela Merkel in pushing through fiscal consolidation in the Eurozone.

U.S. stocks regained their footing as the week progressed, thanks in large part to first-quarter earnings that have generally exceeded analysts’ expectations-roughly three-fourths of the S&P 500 companies that have reported so far have topped estimates, according to Thomson Reuters. Strong showings in the technology sector provided a particular boost to the Nasdaq Composite Index.

The economic backdrop for corporate profits was mixed, however. Weekly jobless claims remained somewhat elevated for the second week in a row, suggesting that the sharp drop in claims earlier in the year may be ending. On Friday, the government announced that the U.S. economy had grown at an annual rate of 2.2% in the first quarter of 2012 versus 3.0% in the fourth quarter of 2011. The headline number masked stronger underlying data, however, according to T.Rowe Price economists. “Core” growth measures, such as consumer spending and housing construction, enjoyed solid growth, while government spending fell sharply. Continued job and income growth remain critical for a self-sustained recovery, particularly given the headwind of fiscal policy uncertainty beyond 2012. (T. Rowe, 4/30/2012)

A Busy News Week Ahead

Posted on April 23, 2012 by Faith Chaffee

A Bust Week Ahead Markets around the world are down sharply today amid concerns about the political picture in France and Holland along with bribery allegations at the Mexican operations of Wal-Mart.

The selloff seems orderly thus far as the market is not breaking down internally like we saw the last half of last year. Domestic large cap stocks are hanging in there and still look fairly positive overall. Commodities have retreated a bit across the board from Gold to Grains and gas prices appear to be easing slightly which would be a boost for consumers.

There is a lot of news to digest this week with several key earnings reports, Fed meetings and presidential primaries in the queue. We expect a bit more downside ahead as the market digests the headlines and continues to work through its corrective phase.

Markets

Last week markets enjoyed their first weekly gain this month, although the technology-heavy Nasdaq moved lower. Earnings remain generally strong, highlighted during the week by solid reports from some prominent consumer and health care firms. Tech shares were particularly volatile during the week, however, due to revenue and margins concerns. Apple, whose large weighting in the Nasdaq and S&P 500 can have a significant effect on market moves, also proved volatile as investors reconsidered the stock’s exceptional rally in recent months.

The week’s economic data restrained the market’s advance, as investors worried that the U.S. economy was experiencing a third consecutive springtime slowdown. Investors appeared particularly discouraged by a decline in March housing starts. Although much of the decline reflected a pullback in multifamily construction following strong recent gains, the more important single-family construction trend remains on a moderate upward trajectory. Nevertheless, the headline weakness, coupled with a decline in an index of regional manufacturing activity, weighed on sentiment. A smaller-than-expected decline in weekly jobless claims and an upward revision to the previous week’s numbers also raised questions about the labor market recovery. T. Rowe Price economists note that while employment growth is indeed slowing from its heated pace in the last two quarters, they expect that the deceleration should be far milder than last year.

Some reassuring signals regarding the European debt crisis may have buoyed markets, but the news from Europe was mixed. A Spanish government bond auction on Tuesday was met with healthy demand, and European officials denied the need for a bailout of the country—a much larger task than rescuing the relatively small Greek economy. Nevertheless, Spanish stocks fell to a new post-financial crisis low on Thursday, after a disappointing rise in yields following an auction of 10-year Spanish bonds. Worries remain that Spanish bond yields will increase further once banks are unable to purchase them with expiring loans provided by the European Central Bank. (Source: T. Rowe 4/20/2012)

	Weekly Change	YTD
S&P 500	0.60%	10.30%
Nasdaq	-0.36%	15.17%
Dow	1.40%	7.46%
R2k	0.97%	8.94%
NCMTX	0.87%	3.24%
E+	1.18%	1.95%
Source:	Niemann Analytics. 4/23/2012

Technical Outlook

Markets continue to be in a precarious position with the main exception being the Large Cap domestic markets (DIA and SPY) which still look fairly positive. We are in a place where either the other markets need to put themselves back together or the last remaining holdouts will probably follow suit and travel lower. The good news is the dollar is acting like it wants to head lower and that would prompt the markets to move higher from here. Kind of strange that both commodities and treasuries are acting like they are – Treasuries look like they want to move higher and commodities looking to favor some downside.

A short term correction, or something more?

Posted on April 10, 2012 by Faith Chaffee

A short term correction, or something more? Technical outlook comes under more pressure to start the week as the jobless number released on Good Friday continues the string of disappointing recent economic data. Short term markets around the globe are now pretty oversold and we should see a bounce at some point in the near future.

Market internals are showing their biggest weakness since this uptrend got underway early in January. It should be interesting to see how far this correction goes and whether it turns into something worse.

Is slow economic growth weighing on sentiment?

Posted on March 26, 2012 by Faith Chaffee

Markets
Stocks were modestly lower overall for the week, breaking a stretch of five weekly gains for the broad S&P 500 Index; the technology-oriented Nasdaq managed a small gain. Concerns over slowing economic growth outside the U.S. appeared to be the largest factor weighing on sentiment. A purchasing managers’ index (PMI) for China declined to 48.1 in March from 49.6 the previous month, indicating a modest contraction in what is arguably the world’s most important manufacturing sector. Similarly, a Eurozone PMI declined to 48.7 from 49.3, confounding consensus hopes for a slight increase. U.S. economic data remained mostly positive, however.

Weekly jobless claims reached a new multiyear low, suggesting a firm footing for further gains in the labor market. Housing market data were mixed but perhaps better than headline numbers suggested. New home sales declined and construction of single family homes fell nearly 10% in February, but that was only a partial consolidation of gains over the previous few months.

More encouragingly, homebuilder confidence remained at its highest level in nearly five years, multifamily construction rose strongly, and permits for new construction hit their best level since the onslaught of the financial crisis. The week’s company-specific news was dominated by Apple’s announcement of its first dividend, alongside a stock repurchase program. After piercing the $600 per share level, Apple’s stock fell back to end the week roughly where it started. A disappointing global growth outlook from shipping giant FedEx weighed on markets and added to worries about a slowdown in China and Europe. (T. Rowe, 3/23/2012)

Source: Niemann Analytics, 3/23/2012.

Technical Outlook
Charts tell a story that favors further upside in this rally. Markets are basically neutral in the short term but money flow continues to find its way into equities, especially the developed markets led by the U.S. but also Japan and Europe looking good. Int’l emerging markets have numerous specific countries (or regions) that look strong as well such as THD (Thailand) and EWM (Malaysia) and EWW (Mexico). China (FXI) is lagging on a technical basis as of late.

U.S. Treasuries have had a countertrend up rally in the short term that should be running into some resistance soon if the stronger intermediate downtrend is going to resume, while the U.S. dollar looks to be resuming its action to the downside as well.

This could be an interesting week as we finish out the first quarter in 2012.

Breakout in bonds could mean a switch back toward normalization

Posted on March 19, 2012 by Faith Chaffee

Interesting market. Bonds got crushed last week. The 10-year was 1.93% a month ago, 2.03% on Monday (3-12-2012) and then closed at 2.30% on Friday (3-16-2012)! This is a big move in the bond world. Prices came in from 3 standard deviations outside their mean to around 1. We are watching this very closely as the breakout in bonds could mean a switch back toward normalization as investors realize the bull (and economy) may keep plugging along even without massive stimulus in the form of QE3 from the Fed.

Another Mixed Week for Stocks

Posted on March 12, 2012 by Faith Chaffee

Niemann Capital Management - Market Review - 3/12/2012 Markets
Stocks were mixed for the second consecutive week despite suffering their biggest single-day loss in three months on Tuesday. The large-cap indexes were flat to modestly lower, while the small-cap Russell 2000 regained some of its sharp drop in the previous week. A disappointing growth forecast from the Chinese government weighed on sentiment early in the week, as did continuing worries over high oil prices. Traders looking for a chance to take profits following the market’s recent rally may have also contributed to the sell-off. The major factor weighing on markets, however, appeared to be concerns over whether Greece’s private debt holders would agree to a reduction in the amount owed them (a so-called haircut) in order to avoid an outright default.

Eventually, fears that the debt deal would fall apart proved unfounded because well over 80% of the participants required agreed to its terms by the Thursday deadline. Investors continued to welcome good U.S. economic news. Most notably, the closely watched monthly payrolls report showed that employers added jobs at a healthy pace in February, while strong figures from the previous two months were adjusted upward. Earnings also saw a healthy increase, holding out promise for gains in consumer spending. In corporate news, Apple—the largest U.S. company by market capitalization and thus heavily weighted in the indexes—released the highly anticipated new version of its iPad on Wednesday. Following some initial skepticism, a generally favorable response to the new device from investors helped the indexes—and particularly the Nasdaq—move back higher at the end of the week. (T. Rowe 3/9/12)

Technical Outlook
Market continues its intermediate term uptrend and is now somewhat overbought in the short term. The risk trade seems to be on as equity markets around the globe were higher on Friday. In fact pretty much all asset classes across the board were higher from Gold to the dollar to Treasuries to High Yield Bonds to Emerging markets. On the downside, volume continues to lag in the U.S. equity markets and while internals are improving, overall not great currently.

Portfolio Managers’ Week in Review

Posted on February 28, 2012 by Faith Chaffee

Niemann Capital Management Week in Review Portfolio Managers’ Review
On Monday, the market fought its way back to positive territory after being down at the open. The market looks like it wants to push higher even though it should consolidate some over the near term. Defensive sectors continue to hang in there. For instance, Pharmaceuticals had a nice move last week. Although defensive sectors have recently lagged their cyclical counterparts, they have not declined enough to be displaced from the portfolios yet. In a sense, leadership remains the same favoring low-beta issues.

What’s interesting is Transports have failed to confirm the Dow’s new highs. High gas prices are pressing on the airlines while the Obama administration’s stance on coal has resulted in a decrease in coal shipments worldwide. A decrease in coal shipments have hurt the railroad industry, etc. We are keeping a close eye on this because normally we would like to see Transports confirm.

Aside from that, volatility has been muted, correlations between sectors and asset classes have come down a bit to more manageable levels and based on the percent of stocks in an uptrend (now solidly above 80%) the market historically has pushed higher from these levels.

In 2009 and 2010, when more than 80% of stocks were in an uptrend, the market ended up being at a mid-point of its upward move suggesting more room to run. As noted earlier, one would expect some consolidation near term but it doesn’t look like the market’s recent advance is over at this point.

Markets
Stocks moved modestly higher in a relatively quiet trading week. The S&P 500 and Dow were able to record four-year highs before falling back a bit, and the technology-oriented Nasdaq reached new 11-year highs. The small-cap indexes remained slightly below the levels they achieved last spring. U.S. markets were closed on Monday the 20th while European markets rallied, thanks to an agreement over the weekend on a new bailout plan for Greece.

The news did not provide as much of a tailwind for U.S. markets, however, perhaps because of the strong rally already recorded in the past several weeks. Rising oil prices may have also restrained gains, as investors worried about the effect on broader inflationary pressures and consumer spending. The week’s economic data remained generally positive. Weekly jobless claims remained stable at a relatively low level and suggested continued improvement in the labor market. The final reading of the Thomson Reuters/University of Michigan’s gauge of consumer sentiment was also revised up to its highest level in a year. (T.Rowe Price, 2/24/2012)

Technical Outlook
Not much different than the recent past – both International and Domestic equity markets look strong for the intermediate term although over extended in the short term. Commodities, across the board, are also looking good as the dollar breaks out to the downside. Not much else to add other than it wouldn’t surprise if the upcoming week is an uneventful one.

Market and Allocation Update for February 24, 2012

Posted on February 24, 2012 by Faith Chaffee

Niemann Capital Management Market and Allocation Update for February 24, 2012 With a gain of almost 1% last week, the stock market continues to impress investors with its persistent strength. Up six of the last seven weeks, the S&P 500 finished last week at a 10 month high and just shy of a four year peak. The Dow is at its highest levels since May of 2008 and briefly pierced 13,000 before falling below it on Tuesday. The NASDAQ is currently trading at levels not seen since December of 2000! With the major indices trading at or near multi-year highs, the ride has been enjoyable so far in 2012. We are happy to participate in a more favorable investing environment but as always, we monitor market conditions closely as several sectors look overbought, underlying momentum appears to be slowing a bit and investor sentiment seems to be growing frothy.

As many of you are probably aware, this year’s advance has occurred with very little volatility. Compared to the last half of 2011 where 1% swings were considered normal, the market has been relatively calm and more “normal” acting with nary a 1% drop in over 7 weeks. In addition, correlations among stock prices have dropped dramatically suggesting a market in which stocks are moving more on company fundamentals than on global macroeconomic headlines. A wide variety of sectors and industry groups are performing well and as a result, occupy the top of our rankings. Broad market leadership is usually indicative of a healthy market.

As of February 1st, all of our managed strategies have been aligned with our newly enhanced models. As part of our process, we continue to pay close attention to how stocks are trending and where money is flowing in to the market as expressed by the percentage of stocks in an uptrend. As the percentage of stocks in an uptrend increases, we add exposure to various asset classes in response to the improvement. As of now, the technical picture remains solid with more room to the upside in the intermediate term. Also of note, while they performed poorly in 2011, international and emerging markets have since repaired themselves and now look to be on somewhat even footing in terms of relative strength and outlook which bodes well for Equity Plus, Dynamic International and Risk Managed Global Emerging Market Sectors (GEMS) should their recent strength continue.

Read Niemann’s entire update and see current strategy allocations – Market and Allocation Update for February 24, 2012

Market and Allocation Updates Archive available here: Niemann Capital Management – Market and Allocation Update Archive

Are you ready for Emerging Markets investing?

Posted on January 18, 2012 by Faith Chaffee

As a trend following manager, it’s safe to say the past year was challenging from a relative strength and momentum perspective. As trends began to emerge, we rotated toward them. Several times they quickly broke down forcing us to sell, producing the whip-saw effect we experienced in 2011.

It’s been one of the strongest starts to a year in quite a long time. But as we’ve seen time and time again, hope can fade quickly as worries about the global macro picture wax and wane.

The AAA downgrade of French debt and its implications for the firepower of the EFSF is the latest in several actions signaling less confidence in the credit worthiness of some developed economies.

For the Portfolio Team at Niemann, we see several catalysts that could be market moving in 2012.

One catalyst we’re watching closely is emerging markets. Focus has shifted to emerging economies because they will most likely provide the best opportunities for growth as developed economies face uncertainty due to deleveraging and austerity measures. While it’s likely the European debt crisis will have an impact on the growth rates in emerging market countries, it does not mean no growth at all for those economies.

Investing in emerging markets with added downside protection (to dampen volatility) will provide a new way for trepid investors to gain access to developing economies. While investors and advisors are eager for its positive trend to materialize, risk management is still crucial in the meantime. Niemann provides access to emerging market opportunities in a risk managed fashion using the same proven approach we’ve used for the last 20 years we’ve been tactically investing for our clients.

Are you ready for emerging markets investing?

To learn more, contact Niemann at 877.643.6222 or sales@ncm [dot] net.