Tuesday, May 31, 2011

Market Condition Change - Confirmed Uptrend

With today's rally Investors Business Daily upgraded the market condition to:

"Market in a Confirmed Uptrend".

I added to equity positions today.

Thursday, May 26, 2011

Scalped a quick 1.5% profit on XLE and XLB

I took profits on my bounce trade on the energy and materials sectors. We netted between 1.5% and 2% one day profit as a result. My timing turned out to be very good.

Currently the market is not trending. Sectors move between oversold and overbought providing for reversion-to-the-mean trade opportunities. This means that if a quick profit on a bounce can be made, it is best to take that profit before it fades.

So far we are weathering the downturn in the market very well. While, as of yet,  the general US market pullback has not been significant, the short term outlook is far from clear. The market hates uncertainty and at the moment uncertainty abounds. The next days and weeks will be very telling; we should know shortly whether or not the old adage "Sell in May and Go Away" is going to ring true or not.



This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.



Wednesday, May 25, 2011

Sold Defensive Sector Holdings

The meter ran out on the utilities sector. Consumer staples have also been acting toppy. Sold both XLU and XLP today.

In the graph below both energy and materials are included in the Basic Materials Sector. We are getting a bounce today as I expected.

Utilities and consumer goods (staples) are definitely laggards.



 

This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.



Tuesday, May 24, 2011

Adding Positions in Energy, Materials and Gold for a Bounce

Prices for energy and materials have corrected a great deal in a short time. I have taken new positions in XLE and XLB to play a bounce off these new low levels.

I have also bought back some gold (gld); prices are rebounding. Moreover, we have gained over 5% so far in our gold miners ETF position (GDX).

I made a very early entry into GDX based on the Effective Volume GDX robot. These robots, sometimes referred to as black box or algorithmic trading systems, are widely used by specialty hedge funds and institutions. These computerized models are generating some very good results.


This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.




Saturday, May 21, 2011

My Secret - I Look at a Lot of Charts

Perhaps the most important thing I learned from my old mentor, Michael Price, was to look at a lot of charts. A picture is worth a thousand words. Much of the time simple is better.

Click on the chart below and try to determine which sectors have obviously broken-out to the upside. To submit your answers click on [comments] at the bottom of the blog.

Hints - 1. It's price is spiking higher  2. the symbols end in P, U and V.

  • XLB = Materials
  • XLE = Energy
  • XLF = Financials
  • XLI  = Industrials
  • XLK = Technology
  • XLP = Consumer Staples
  • XLU = Utilities
  • XLV = Healthcare
  • XLY = Consumer Discretionary

(Click on chart for easier viewing -
then click on the Windows back button to return)


 


Playing Defense

The major US indexes have all pulled back in May. Since April 28th small cap stocks have pulled back the most with a loss of over 4% and the S&P 500 is down a little more than 2%.

While the broad market has been declining the Consumer Staples sector (XLP) has risen over 2 1/2%.

(Click on chart for easier viewing)


 

We are nearing an area that should act as support for the broad markets. If that support area is breached to the downside the odds of a full market correction would go up. If that turns out to be the case I would become even more defense or possibly even play the downside with inverse ETFS (the equivalent of shorting the market for moderate to aggressive accounts.




This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.






Friday, May 20, 2011

Cyclical Stocks Underperforming - Economy Expected to Slow

Below is a chart comparing the relative performance of the Morgan Stanley Cyclical Index verses the S&P 500 Index. When the trendline is rising the cyclicals are outperforming. When the trendline is falling cyclicals are lagging the market.

Clyclical stocks include names like US Steel, Caterpiller, Freeport McMoran, etc.


In mid-February, cyclicals pulled back sharply then attempted one more rally in March. Ultimately, the ratio failed to make a new high. In the last week cyclicals started to fall apart.

Due to the change in the economic outlook we have been repositioning the GWM Model Portfolio to emphasize the defensive sectors such as Consumer Staples and Utilities.
 
Consumer staples companies are less volatile and generally pay high dividends.  Companies such as Kimberly-Clark Corporation, McDonald’s Corporation, Clorox Company or ConAgra Foods Inc. make up this sector.


 
This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.






Thursday, May 19, 2011

Possible Current Economic Cycle Stage

The economy is cyclical. The typical business cycle is about 4 years. The economy cycles through states of contraction and expansion, i.e., Full Recession,. Early Recovery, Full Recovery and Early Recession. Historically, the performance of individual market sectors varies depending on the stage of the economic cycle we are in. Consumer Staples should perform well in the early contraction stage, where as, we would expect technology to perform well in an early expansion. Ideally, you should make periodic adjustments to your investment portfolio to best fit the economic stages as they reveal themselves.

So, what stage of the Economic Cycle are we in now? Hint - Commodities seemed to have peaked and consumer staples are current relative outperformers.



This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.



Wednesday, May 11, 2011

Market Comment 05 11 11

The Market was led lower today on the back of commodities, oil and precious metals.














All GWM Model Portfolios are currently positioned defensively We have little or no exposure to commodities, oils and precious metals. Our Core and International Core folios were mostly in cash going into today.

Our Sector Rotation folio is positioned in the defensive sectors only, healthcare, utilities and consumer staples.



Our Flexible Income folio is diversified in high yielding assets that continue to perform well.


This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.


Monday, May 9, 2011

Gold May Drop Until August

Passport Capital's John Burbank says gold may drop until August. He is a bull in the long run, but see weakness in gold and commodities and strength in the US Dollar as QE-2 winds down. Click on the Video Spotlight Icon to view a 7 minute Blumberg interview with John Burbank.

Thursday, May 5, 2011

Market in Correction Mode

Investors Business Daily's Market Pulse has posted an amazing 11 changes in market condition so far this year. Market Pulse is now posting - Market in Correction.

Leading stocks once again pointed to a change in the market. Short-term performance of these top stocks seem to give us an early warning of a pending change in trend of the market in general.

The markets in general and the commodity sectors in particular are still keying off the US Dollar; dollar up - market and commodities down and visa versa. The US Dollar has been gaining in strength. This is good for bonds and bad for stocks and precious metals in particular.

As you may know, QE-2 is coming to an end on June 30th. This essentially curtails the extra liquidity that seems to have boosted the markets for some time now. The following chart shows the correlation between the market and Fed Balance Sheet expansions and contractions (quatitative easying expanded the Fed balance sheet).
(Click on chart for easier viewing)


I really don't know how much the end of QE2 will affect the markets, but given the fact that we are entering a seasonally week period in the market, a further reduction in exposure to market seems to be prudent at this time.

Tuesday, May 3, 2011

GWM Sector Rotation Folio - In the Right Place at the Right Time

The energy, materials and metals sectors were hit pretty hard today when the Fed stated that they may be less accomodative because tax revenues are up. Last month I rotated out of the energy, silver and commodity related sectors and into the defensive sectors, healthcare, utilities and consumer staples. As a result we held up pretty good today.

The following graphic by ETF Radar Magazine shows which sectors performed best last month.




Monday, May 2, 2011

Dow Jone Industrial Average - Trendline Analysis

Below is a price chart of the DJIA. Since August prices have remained in the price channel. Each time, however, that price has touched or came close to the upper channel line we have experianced a rapid decline. Will it happen again? We are within about 100 Dow points of the top channel line right now. I'll be watching.



This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.


Lt. Christopher Gerritz Completes First Solo Flight

Lt. Christopher Gerritz took his first solo flight in Colorado today.

As many of you know, Chris Gerritz, GWM Advisor Associate, is in flight training. Chris said ...

"Solo'd the DA-20 Mighty Katana!  Perfect blue sky day, perfect landings."


Congratulations Christopher!




Drop him a line to let him know how cool this is.

Sunday, May 1, 2011

Osama bin Laden is Dead!

Osama bin Laden is dead. He was killed by American Special Forces in Pakistan last Week.

At this hour the stock market futures are up sharply and gold is declining.

The Gerritz Letter

The May issue of The Gerritz Letter has been published. It should be in your email inbox now.


Our main source of new business comes from referrals. A good way to introduce a good friend to us is to forward the GWM newsletter to them or simple suggest they visit the GWM website.

The majority of my time is now spent managing client portfolios and monitoring the market. Most other advisors in the business spend the majority of their time finding new clients.

I truly appreciate those that have referred their friends and associates to us. Thank you very much.