Thursday, December 30, 2010

GWM Model Porfolio Non-Mutual Fund Holdings

The following chart shows a list of GWM Model Porfolio Non-Mutual Fund Holdings. The chart shows the symbol and the company or ETF name in blue colored lettering. The "Latest Close" is the share price.

The GWM investment style can best be described as "Trend Following". We scan the market to identify company stocks and ETFs that are in uptrends. We use Brian Shannon's AlphaScanner to screen over 6,000 stocks. The AlphaScanner provides us with three different ways or time frames with which we can evaulate the trend of the market, a stock or an individual ETF. I will discuss the Weekly Timeframe in this post.

Weekly Time frame  -  The longer-term and dominant trend -

The weekly trend is useful because it filters out the daily noise of the market. Additionally, we use moving averages to further smooths out price fluxuations, making trend verification easier.

Stocks do not go up in a straight line. Fluxuation is normal and should be expected.

Stock price movement or market structure can be categorized into 4 stages:

  1. Accumulation Stage
  2. Markup Stage
  3. Distribution Stage
  4. Decline Stage
On a weekly time frame, we want to invest in stocks or ETFs that are in a
Stage 2 or Markup phase. Our current holdings (minus mutual funds) are listed below along with their current weekly, daily and intraday stages.

Click on the text link below to view a graphic explaining the above concepts.

Sunday, December 19, 2010

Sector Analysis for Week Ending 12 17 10

Most GWM Model Portfolios include an allocation to equities. The equities allocation is subdivided into sub-sections that utilize different management strategies. One of these sub-sections or categories is titled "Equity Sector Rotation". Sector Rotation strategies can be a very effective long term.

The S&P 500 is comprised of companies involved in different industries; these various industries can be differentiated by sector, i.e., Energy, Healthcare, Materials, etc.  We monitor the market to identify the best performing sectors at the moment. Our strategy is to rotate into the top performing sectors.

As illustrated in the chart below we can clearly see that the materials sector, energy sector and consumer discretionary sector were among the best performers last quarter. The second chart examines last week's performance alone. It shows that investors have been rotating into the consumer staples and healthcare sectors. This gives us an indication that investors may be getting more defensive as the year comes to an end.

(Click on chart to enlarge it for easier viewing)

Last Quarter S&P 500 Sector Performance -

Last Week's Sector Performance -

Saturday, December 18, 2010

Interest Rates Rise - Bonds Fall

Fed Chairman Ben Bernanke's efforts to lower interest rates through quantitative easing have not delivered the expected results in 4th quarter 2010. Interest rates have, in fact, risen dramatically. This has caused a sell-off in various bond markets. Long term US Treasuries have been hurt the most, while high yield bond have fared the best.

As the bond market began to wane, our trend tracking strategic model gave us sell signals. Adhering to our sell discipline, bond fund positions were systematically liquidated.

Junk bonds and convertible bonds are really a proxy for the stock market. They are less affected by interest rate changes. Since we are bullish longer term on the stock market we recently added new long positions in one of our old junk bond fund favorites and a convertible bond ETF.

The chart below clearly illustrates the decline in high quality bonds.

(Click on chart to enlarge it for easier viewing)

Thursday, December 9, 2010

Market Comment 12 09 10

Interest rates suddenly rose this week causing a decline in government bonds.  While many bond funds are being affected, junk bond funds are holding up very well. Convertible bond funds are also doing quite well.

Due to unresolved issues concerning the Bush tax cut extention, the  market environment is uncertain. Until the tax issues are settled, choppy market action will likely be the norm. Once the tax issues are settled we'll see what trends develop then.