Saturday, June 26, 2010

Weekly Market Update 06 25 10

The bears had the upper hand this week and not only pulled the market from its recent high but also low enough so that the widely watched 200-day moving averages of the major indexes were pierced to the downside. The S&P 500 fell below its psychologically important 1,100 level and ended the week with a loss of -3.7%.

The market as a whole is now oversold on a short-term basis, so a rally is likely to develop within a day or two. The nature of that rally will provide us some hints about the future trend of both stocks and junk bonds.

Friday, June 18, 2010

Weekly Market Update 06 18 10

 The Dow Jones Industrial Average rose 3% for the week. The S&P 500 gained 2.4% and the Nasdaq rose 3%. All major indexes are back above their 200-day moving averages.

Tuesday, June 15, 2010

Market Comment 06 15 10

The market was up sharply on Tuesday.

The S&P 500 index closed above its recent resistance level (1106) and above its 200 day moving average.  When the S&P crossed above the 200 day moving average (DMA) buying accellerated.  This market is clearly trading off techincals.

If the rally holds we will want to participate.

Monday, June 14, 2010

Market Beginning to Show Signs of a Near Term Bottom

The late day advance on Friday, while on very light volume, was a good sign. Stock market futures indicate a positive open on Wall Street Monday morning. Our indicators are just beginning to turn positive. If recent gains hold I will begin to carefully scale back into the market.

Thursday, June 10, 2010

Congratulations to Christopher Gerritz

- Congratulations -

Christopher M. Gerritz graduates with an electrical engineering degree 
 from Oregon State University on Saturday June 12, 2010.

We are very proud of you.
Mom & Dad

If you also want to congratulate Chris
send him an email message at


Post a comment on this blog.

Market Comment 06 10 10

We finally got a bounce; and a good one it was.

The market gapped up at the opening and gained strength through the close.

Understanding Candlestick Charts

Wednesday, June 9, 2010

Market Comment 06 08 10

We have a double bottom in the S&P 500 chart. This double bottom adds further strength to S&P 1040 support level. We are now getting a bounce off support.

Risk levels remain quite high for now. While the market will, more than likely, rally for a couple days, investors are very skittish. 

The market is in a trading range between S&P 1040 and 1106. It is prudent to wait until the market develops a trend before jumping back in.

Furthermore, a bearish head and shoulders pattern may be developing. Should the current rally takes us up around the S&P 1150 vicinity and then fail, falling back to the current support, we will have completed the right shoulder of this high probability and ominous bearish chart pattern. We will be watching the situation closely.

(Click on chart to enlarge it for easier viewing)

Head And Shoulders Pattern

What Does Head And Shoulders Pattern Mean?

A technical analysis term used to describe a chart formation in which a stock's price:

1. Rises to a peak and subsequently declines.

2. Then, the price rises above the former peak and again declines.

3. And finally, rises again, but not to the second peak, and declines once more.

The first and third peaks are shoulders, and the second peak forms the head.

Investopedia explains Head And Shoulders Pattern

The "head-and-shoulders" pattern is believed to be one of the most reliable trend-reversal patterns.

Saturday, June 5, 2010

GWM Equity Trend Tracking Model

The chart below illustrates a back-test of the GWM Equity Trend Tracking Model. You can see that it is quite effective.

The system is based on relative strength,
comparing the daily performance of the S&P 500 to a risk free
money market fund.

Signals are generated when stocks are either out-performing or under-performing the risk free money market rate of return. 

The red signal dictates that we sell the stock position and place the proceeds in the money market.

The Green signal dictates that we sell the money market fund and invest in the stock position (SPY).

The following graphic includes three charts:

Top = S&P price history

Middle = Relative Strength and signal Generator (small green & red dart shaped objects)

Bottom = Comparative cumulative results:

   Alternating red green line illustrates the results when buy/sell signals are applied.

   Solid red line illustrates the buy & hold results.

(Click on chart to enlarge it for easier viewing)

The system generates an occasional whipsaw. This is where a buy signal is generated quickly after a sell signal is given, resulting in a small loss. This should be viewed as the cost of insurance. We never really know when a small drop in the market may be the beginning of a major decline, such as the one we experienced in 2008.

Humbled by Colleague's Recent Comment

I was mentioned in a recent newsletter by LifePlan Advisors, a Florida Investment advisory firm.

I am always humbled when someone I respect publishes a favorable comment about me. Below is a comment posted in the June 2010 issue of the LifePlan Advisor newsletter by Stephen Hood.

“I also know this. I have never been more confident in our money management program, in its ability to avoid the many severe pitfalls that lie ahead of us. I firmly believe systems are in place that will protect our clients' lifetime financial security, come what may.

I have many people to thank for the help and guidance in developing this program. First of all my friends and clients. Without their loyalty and steadfastness through the years I never would have celebrated my 30th year as a financial advisor.

Second, my colleagues and mentors, the many people I have learned from over the years. From Steve Gerritz, my longtime friend and colleague in Medford Oregon, to Ulli Niemann, an advisor in California by way of Germany, to the Mad Hedge Fund trader, and many others. They have all had a major impact on my management style and philosophy. Thank you all.”

I appreciate Steve's comments. He is definitely one of the best in the business.

Friday, June 4, 2010

Market Comment 06 04 10

The market has been shifting in and out of an oversold condition the last couple weeks. After failing to break through resistance at the S&P 1106 area on Friday the market pulled back sharply. In a bull market we expect vigorous rallies out of oversold conditions. Instead, the market is barely holding its own.

The market has yet to breach the important support levels around S&P 1044; if we get a close below that we could see the market potentially decline to the S&P 950 area.

At the moment we have very little exposure to the stock market. I am prepared to take further action to protect account assets if required.

(Click on chart to enlarge it for easier viewing)

Thursday, June 3, 2010

Market Comment 06 03 10

The Market was up slightly on Thursday.

The S&P 500 could not break through resistance at the 200 day moving average (about 1106). It touched it and then quickly dropped back down.

Friday morning the government will release the highly anticipated employment data numbers. More than 500,000 new job creations are expected. Most of these new jobs will be attributed to US Census Bureau hiring. More importantly, the employment report needs to show improvement in private sector job growth. If we don't get an increase in private sector new hires the market will probably sell off.

Wednesday, June 2, 2010

Market Comment 06 02 10

The Market was up nicely on Wednesday.

We still need to get a close above the 200 day moving average resistance level before investor confidence can be restored to any degree.

(Click on the Chart to Enlarge)


We have held Putnam Diversified Income Trust (PDVYX) for some time now. It's relative performance to the S&P 500 (spy) has been very good. Year to date SPY has lost 3.11% (annualized rate at -7.44%), while PDVYX has gained 5.25% (annualized rate at +13.34). Not bad for a fund that Morningstar rated with a meager 2 out of 5 stars). Well, so much for Morningstar ratings.

PDVYX = Red Line
SPY = Blue Line

(Click on the chart for easier viewing)