Outlook Shifts For Better

Our newly chosen market indicator of choice, the Effective Volume indicator, gave us a signal that the current market correction ended on March 19th. Investors Business Daily provides a daily market condition update in a section titled "Market Pulse". IBD's "Market Pulse" changed from "Market in Correction' to " Market in Confirmed Uptrend" after the market close today.

This is definitely good news.

I do want to point out that our favorite market indicator, Effective Volume, called the end of this market correction a full 11 days before IBD. I will be providing an addendum to the April issue of The Gerritz Letter that will discuss this highly reliable and useful market indicator. Be sure to click on the "Effective Volume" link in the upcoming issue of The Gerritz Letter for an explanation as to how it works.

The Market Correction Appears to be Over

 It appears the correction is over and any dips we get from here will likely be shallow. I am in the process of adding to our equity exposure.

Small cap stocks weathered the downturn best. Last week I began building an overweight position in IWM (small cap ETF). I have also re-established ETF positions in energy and industrials.

Market leaders are once again asserting themselves. I have initiated new positions in Acme Packet and Aruba networks among others.

Precious Metals Failed Breakout

The breakout in precious metals failed. Failed breakouts occur when an investment breaks through previous resistance, giving the signal that higher prices lie ahead, and then stages an abrupt reversal.

There is an old saying on Wall Street that says: From failed moves comes big moves. Due to the higher risk this situtation now presents I chose to sidestep the precious metals for now.

(Click on chart for easier viewing)

Silver Breaks Out Again

Silver, gold and oil have begun to breakout once again. I have been buiding positions in each.

Market Comment 03 22 11

The market staged a strong 3 day rally.  This rally has resolved the oversold condition of the market that had developed the previous few weeks.  The market behavior exhibited in the next few days should give us an indication if the bull market correction is over.

Junk bonds are beginning to move up again. International bonds are also looking good.

Quantitative Easing - Effect on the Market

This recent Bloomberg chart-or-the-day shows the close correlation of the rise in the S&P 500 to the rise in Fed assets (which is the result of QE I and QE II).

(Click on chart for easier viewing)

QE II is scheduled to end on June 30, 2011. Since markets are forward looking, investors will likely discount the end of QE II well before June 30th.  Due to the current political environment, a potential QE III may not be forecoming. Is the market and economy really ready to stand on it's own? We will see.

The talking heads have blamed the present market woes on the headlines, i.e. the devastating earthquake in Japan and the troubles in the Libya. The market actually began showing signs of distress prior to the earthquake and the escalation of events in the Libya. For example, the decline of certain leadership stocks.

Last Thursday and Friday the market rallied off of oversold conditions. The rallies seemed to lack conviction and volume was light. The next down-leg will provide us with more insightful information as to whether or not the correction is over.

Headline news driven markets are unpredictable. I remain cautious.

Market Comment 03 16 2011

After Wednesday's big sell-off, the stock market, as measured by the S&P 500, is now negative for the year.

I did take some profits in one of our high yield funds.

I also added positions in both long term US Treasuries and Swiss Francs as a hedge against our remaining high yield and equity fund investments.

Both US treasuries and Swiss Francs are on the rise.

Swiss Franc



Long Term US Treasury Bond

Market in Correction Mode

The major market averages were lower all day and closed to the downside.  All the major averages now have patterns of lower highs and lower lows. This is the definition of a downtrend. The market is in official correction  mode now.

The S&P 500 futures are selling off hard as of this writing, so Tuesday could also be an ugly day.

Our risk management system is showing its effectiveness again.  All GWM Model Portfolios are currently well positioned to minimize account loses and weather this downturn.

Because we have plenty of cash on the sidelines we will be better positioned to take advantage of this downturn and pick up some bargains when the bull market resumes. 

(Click on chart for easier viewing)

Market Performance - Weekly - Month to Date - Year to Date -

The market remains in a hightened risk environment.

Priced as of March 11, 2011, market close

Market Comment 03 10 11

The market remains very volatile. Today the S&P 500 closed below it's 50 DMA (50 day moving average). The market action over the next few days should be very telling. If I had to guess, I would expect further downside. I closed out our remaining positions in gold this morning. At the moment all GWM Model Portfolios have minimal exposure to equities.

http://www.gerritz.com/



Took Profits in Silver and Crude Oil ETFs Today

I took profits in silver and crude oil ETFs today. We made a nice profit in a short time.

I believe the "Day of Rage" planned in Saudi Arabia on Friday will likely turn out to be a none event.  Saudi Arabia is not an Egypt or Libya. The Saudis are much wealthier and their tribal ties are much stronger.

Oil has been driven up by speculation and fear, not fundimentals. We now have no exposure to oil.

Is a Market Correction at Hand?

Is a Market Correction at Hand?
Video Market Analysis by:
Stephen L. Gerritz, CFP

Click the Video Spotlight icon to view video.

Rare CNBC Interview with the world's largest hedge fund manager

Ray Dalio, founder & CIO of Bridgewater Associates, runs the world’s largest hedge fund with $89 billion under management, returning more for the fund’s investors last year than Google, Amazon, Yahoo and eBay combined.


Click on the Video Spotlight icon to access this very insightful commentary by Ray Dalio.

Physical Gold vs.Gold Stocks

Most GWM Model  Portfolios currrently have a position in GLD (Physical Gold ETF). The chart below compares the performance of physical gold to a portfolio of gold stocks (GDX ETF) during the stock market decline in 2008. Physical Gold held up very well, while Gold Stocks languished during this period.

If the market were to correct near term, I would expect the physical gold ETF, GLD, to hold up once again.

(Click on chart for easier viewing)