Wednesday, June 29, 2011

Greek Parliment Passed Austerity Package

While the Greek citizens riot in the street, the parliment passes the austerity package. This is a positive because the IMF and the banking system will now backstop the Greeks so they will avert a default on their debt, which would have been catastrophic.

The markets are up slightly. I am a buyer of equities today.

Tuesday, June 28, 2011

Market Comment 06 28 11

We had a good day in the market today. We are still not out of the woods yet, but the markets are beginning to stabilize. We are once again approaching the S&P 500 resistance area at the 1300 level.

Notice on the chart below that the 200 Day Moving average is acting as support. We have bounced off it twice now. I will add more equity positions on dips.

(Click on chart for easier viewing)


The Greek Parliment votes on their austerity program late tomorrow. The market is pricing in a yes vote. If  they produce a no vote the market could sell off dramatically.



This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.

Friday, June 24, 2011

Market Comment 06 24 2011

Another tough day in the market.

(Click on charts for easier viewing)
Then click on windows back buttom to return


Recent Sector Performance

Defensive sectors held up until the last couple days



Gold Smart-Stop hit

I liquidated 1/2 of our GLD position - may liquidate remainder if weakness persists

Consumer Staples and Healthcare liquidated as preemptive move based on unusual weakness

Added to Utilities  - Only S&P sector that is working



Flexible Income Folio performing well


The market is in turmoil and trying to navigate it is extremely difficult. The markets are very choppy, one day up big - the next day down big. Almost all sectors are trading as a block with little consideration to the fundimentals; we either have a "Risk On Day" or a "Risk Off Day".

Our Flexible Income folio's relative performance is helping offset some of the negative performance of our Equity foliios. Net - Net we are holding up very well.

I may begin to take some bond/fixed income positions in our Equity folios rather than have these folios merely sit in cash.



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

Thursday, June 23, 2011

Whoa - What a Ride!

A major drop in oil prices was the catalyst for a major slide in the market averages Thursday morning. In an apparent move to quash oil prices the president ordered the strategic reserve to be opened. As perverse as it may seem, the stock market has been positively correlated to oil prices of late.

After dropping more than 240 points the market reversed course on news of an agreement being reached by Greece and the European banks. The Dow ended up losing 59.67 points on the day.



I was able to take a position in GDX (gold miners ETF) while the prices were down. I also picked up XLV (healthcare ETF) on the dip.

An observation of possible significance that I made was the fact that the defensive sectors did not hold up as well as would be expected.  This is reminiscent of the behavior they displayed in 2008 just prior to the general market's big slide.

Utilities, healthcare and consumer staples may be changing their character at the moment. After today's action I will definitely be making a mental note.



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

Sunday, June 19, 2011

Sector Performance Analysis for 4 Week Period Ending 06 17 11

No place to hide. This is why we have carried a relatively high cash position in all GWM Model Portfolios lately.

The decline has been very orderly, perhaps too orderly. What we need is a good dose of fear to washout the sellers and set the stage for a reversal to the upside.

Lots of expected news next week that will have an affect on the markets. The Greek issue remain a key focus. I believe a short term resolution to the problem is at hand. If not lookout below. The big issue here is not Greece itself but the fact that the European banking system owns so much of their soverign debt. Add to this that Ireland, Portugal and Spain are right behind. A Greek dept default could create a domino effect that would have global ramifications.

Our early indicators are pointing to another bounce if not a short-term trend reversal. We are at very important support levels on the S&P 500. It could go either way. I will be watching closely.





Saturday, June 18, 2011

Major Markets Weekend Update

Oil and commodities were down big last week while the US Dollar was slightly down. This is unusual because they generally are inversely correlated.

The stock market finally broke its 7 week loosing streak but did so with a very whimpy gain of just +.04%.

Gold is beginning to shine once again.

Last Weeks performance

S&P 500        +.04%

Silver              -.90%

Gold              +.48%

Oil                - 6.5%

US Dollar     +.22%

CRB Index  -3.56%    This is the commodities index

Friday, June 17, 2011

S&P 500 Touches and Bounces Off 200 DMA

It was a text-book perfect technical bounce; the market (S&P 500) tagged its 200 day moving average on Thursday and bounced perfectly.

Futures are pointing to a big up opening for Friday morning as well.  This word of caution however; the market rarely bottoms right at the 200 day moving average. The bottoming process is generally a messy process and rarely a neat and highly predictable one day event. We remain cautious and more inclined to sell into rallies rather than be buyers on bounces at this point.

(Click on chart for easier viewing)


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






Wednesday, June 15, 2011

Market Comment 06 15 11



Today the S&P 500 retraced all of yesterday's gains and then some.

We can not control the market, but we can control what we do. We continue to maintain minimal exposure to the stock market. We have also slowly upgraded the quality of our bond/ income holdings.

We are approaching major areas of potential support, the 200 day moving average and the March lows in particular. How the market responds at these levels should be very telling.





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

Tuesday, June 14, 2011

GWM Bond/Income Fund Management System Generates a Sell Signal

After holding Metropolitan West High Yield Bond fund (MWHYX)  for quite some time we finally got a sell signal. This was the last junk bond fund that we were holding. Only Shareholders Service Group accounts held MWHYX.

When the share price (red line) crosses below the smoothed blue line (50 day moving average) a sell signal is generated. The small green dart in the lower right corner of the chart is the actual buffered sell signal. As per our sell discipline MWHYX was sold in all accounts.

(Click on chart for easier viewing)


 



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

Behold The Bounce



This is what a bounce looks like on a 10 minute chart. (each candlestick = 10 minutes)  As I write IWM is up 2.25% so far on the day. With its timely buy signal, the IWM robot once again did a great job.







IWM's share price has moved up sharply on very good volume.

(Click on chart for easier viewing)




If the gain holds into the close we may rally for a couple more days. My personal inclination is to take some profits on strength in the current environment; so, adding a little descretion, I will sell one half of the position in IWM and hold the rest as until the next robot signal.


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

Sunday, June 12, 2011

Russell 2000 Small Caps -Volatility - Buying the Dip and Robots

I have added a new folio to some of the GWM Model Portfolios. This folio is labeled "Long/Short". The distinguishing characteristic of this folio is that it can play both uptrends in the market (long = owning assets that benefit from the market going up) and downtrends in the market (short = owning assets that benefit from the market going down).

Another important aspect of this folio is its reliance on an algorithmic based trading system sometimes referred to as a robot. It has been reported that as much as 70% of trading volume is now generated by such computerized systems. The robots I use were designed to focus specifically on one market sector alone. Currently I have access to two such robots developed by Pascal Willain, author of Value in Time, published by John Wiley and Sons, Inc. The first is the GDX robot and the second is the IWM robot.

The biggest enemy to investors is their own emotions. The fact that robots have no emotions gives them an edge.

On Friday I took a small position in IWM (Russell 2000 small-cap index ETF) based on a strong buy signal from the IWM robot. The following is an analysis of the trade:

  • Strong buy signals are given a 1:3 risk/reward ratio. The robot recommended stop is just 2% below the recommend entry price.  This means that for every dollar at risk you have the potential to gain three. For example: $10,000 invested - amount at risk (potential loss at stop) = - $200 -- target gain = $600.
  • Technical analysis - Increase in volatility (Wall Street double talk for prices declining)  -  IWM has declined by 9.71% since its April 29th high.
  • IWM is extremely oversold - stocks tend to rebound from an oversold condition (bounce up)
(Click on chart for easier viewing)


The robots I am using have shown very good results in all market conditions based on actual trades and backtest studies. The key is to maintain discipline in following the signals. The results show a greater than 70% success rate.

Previously I was going to add the Long/Short robot folio to aggressive accounts only.  I more recently determined that most GWM investors could benefit by having it due to the up and down nature of the markets. Position sizing and risk is still overwhelmingly determined by GWM Model Portfolio selection; the Golden Years Model has the least risk exposure; the Go Getter Model has the most exposure.


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








Saturday, June 11, 2011

Market Comment 06 11 2011

The S&P 500 index is roughly 20 points north of the widely watched 200 day moving average. The 200 DMA is also in the vacinity of the March 2011 lows, which may act as a strong support area. If the market does in fact decline to this level we would expect to see a strong bounce off support.

(Click on chart for easier viewing)



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, June 10, 2011

Dipping Our Toes Back in the Water 06 10 2011

The market is now in an extremely oversold condition after an S&P 500 decline of over 6% as I write and the small caps (iwm) are down about 9% since April 28th. The markets have now endured roughly six weeks of declines.

We have managed to shield our accounts from much of this pain by going largely to cash. Markets rarely go straight down. When investor sentiment reaches extremes and stocks become extremely oversold the large players begin to quietly accumulate stocks. According to our "Effective Volume" studies we are reaching the point where there is a likelihood of, if not a short term trend reversal, at least a short term bounce.

I have begun to dip our toes back in the water with equity purchases in the beaten-down sectors, i.e., small caps (IWM) and a small amount in materials and energy. We may be a little early, but scaling back in at these levels seems to make sense from a risk/return perspective.

Tuesday, June 7, 2011

Market Comment 06 07 2011

The S&P 500 breached the 1295 support zone today. The market is now in oversold territory. Furthermore, negative sentiment is reaching an extreme. In the past these elements when combined acted as catalyst for producing either a bounce or a trend reversal.

The previous bounce turned out to be a bull trap. It popped up briefly, drawing in buyers, only to quickly reverse course again.



The nature of the coming bounce should be very telling. We will remain defensive until we gain more clarity.



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.




Sunday, June 5, 2011

Current Outlook 06 05 2011

The market has now fallen for five straight weeks. The chart below indicates that the S&P 500 is at the critical support level right now. A push below the April lows, around the 1297 level, would indicate a potential further drop to the March lows of 1250.

The economic headline news has been horrible. As you have no doubt heard on the news, the US economy is slowing and jobs for Americans remain a big problem.While a deal to bail out Greece has been struck it appears that the cost was under-estimated; instead of 60 to 80 Billion it now looks more like 100 Billion.

The large candlesticks on volume in the chart below indicates that the institutions are in sell mode; this is confirmed by our Effective Volume studies. It is never a good idea to bet against the big money.



Much damage has been done to market structure and it will take time to play itself out. It may very well take much of the summer for the market to build a base.

Risk is very high at the moment. We currently have minimal exposure to stocks and high yield bonds. There are times when it is best to simply remain on the sidelines.



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, June 2, 2011

Bad Economic News Fueling Market Volatility

It has really been a tough week for the market. The markets have suffered from a litany of bad economic news:


April Factory Orders were Down

The March Case/Shiller Housing was Down

The May Chicago PMI was Down

May Consumer Confidence was Down

May ADP Employment was Down

May Motor Vehicles Sales were Down

May ISM was Down

Weekly Unemployment was slightly improved but not as much as expected

In addition to downgrading Greece’s creditworthiness, Moody's is also threatening to put the U.S. on credit review if no debt reduction agreement is reached.

On Friday morning we may see some real volatility in the market if the highly anticipated non-farm payroll numbers disappoint in a big way.

After being stopped out on a large part of our positions we can safely watch from the sidelines as mere observers. We can get re-invested as the market begins to show signs of stability again.



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.




Short-term Stops Hit

The following short-term smart stops were hit. (indicated by red flags) Per my risk management discipline the related positions were sold today.


(Click on chart for easier viewing)




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, June 1, 2011

Market Comment 06 01 11

Investors Business Daily's "Market in Uptrend Call" was sabotaged by the release of worse than expected numbers in the ISM survey report today.  The Institute for Supply Management's index, a gauge of national manufacturing activity, slipped to 53.5 for May, down sharply from 60.4 and below expectations of 57.6. The employment report is due out tomorrow. Based on the ISM report, estimates for job gains are being slashed. Additionally, Standard and Poors downgraded Greek Debt.

I did add to equity positions after the initial 150 Dow point dip. I may have to re-assess this move if we don't get a bounce tomorrow.



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.