Friday, July 29, 2011

Is it Time to Buy?

Most of this year the market has been in a trading range. The S&P 500 Index is now getting very close to its lower channel support line. If the debt ceiling legislation is not passed by monday the market will likely reach or punch through support. If a debt deal is agreed upon, we should get a nice bounce in the market.

The chart of the S&P 500 below is called a candlestick chart. It is called a candlestick chart because each day's trading is represented by a red or black bar that resembles a candlestick with a wick sometimes protruding from both the top and the bottom. The shape and location of these candlesticks can help us gain insight as to how the trading day, week or year has evolved. I like to use charts in my market commentary because they allow me to assess the market's condition in a simple and visual way.

So what is this chart telling us? Well, aside from telling us that the market is in a trading range, it also tells us we are near a potential buy point. If you want to make money in a trading range market environment, you need to buy at or near support and sell at or near resistance (the top channel line).

(Click on chart for easier viewing)





The red candlestick on the right-most represents yesterday's trading action. Notice that it has a long lower wick. This tells us that large players stepped in to buy, pushing the market up from its low of the day. This is a positive. It means that to some large buyers the price has reached a point of value.

If we buy near support we can define our risk and potential return by placing a stop just below support. If support holds our target is the top of the trading range.


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.

Buying the Dip

I have gone 100% long in the GWM Long/Short Folio.

I also added an additional 25% equity position in the GWM Core Equity Folio.

The size of the positions taken and the risk assumed is dependent upon your chosen GWM Model Portfolio.

The market has declined for 5 or 6 days now, creating a buying opportunity. We still might get a sell-off early next week if our elected officials don't come to a resolution over the weekend on the debt ceiling problem. If they don't get a deal done by Monday or Tuesday the market will force them to get it done or face more ridicule.

My job is to manage risk, not to avoid risk. New protective stop loss levels have been calculated and set in place.

Because we have made it through this correction relatively undamaged we are better prepared to spend a little account capital and mental capital to take advantage of the situation.


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, July 28, 2011

Market Comment 07 28 2011

Investor's Business Daily Trend Change:

Market in correction

Our intermediate term Market Direction Model (MDM) remains positive (Long).

We were stopped out of a number of positions on Wednesday. At the moment headline risk remains extremely high. We will maintain a cautious stance until we get some resolution on the political front.

Long/Short Folio: No short signal was issued as of yet.

In our Long/Short Folio our gold miners ETF (GDX) was stopped out Thursday morning. We did add back a 1/2 position in of our small cap ETF (IWM) after being stopped out yesterday.

Recent changes I have made to the holdings in the Flexible Income Folio have been a positive. We remain Long GLD (gold ETF) in the Inflation Hedges Folio.

We are no strangers to market turmoil. We have handled tough situations in the past and will handle the situation we are now confronted with. The key is to preserve both account capital and mental capital so that we are able to seize opportunities as they arise.


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, July 27, 2011

Market Comment 07 27 2011


The debt-ceiling standoff is going nowhere. Investors ran out of patience and headed for the exits.

Multiple equity positions were sold after stops were hit. As a pre-emptive measure I did exit our NASDAQ 100 position (QQQ) this morning.

If we get more downside tomorrow I will further reduce risk assets. After today, our equity exposure is relatively small.


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.

Gold - Still Going Higher

Gold has been going up. What will happen when Congress resolves the debt ceiling issue? I suspect that it may come down some, but not by much. It will depend on the extent that austerity measures are included; I am not expecting a lot of meaningful cuts.

My sentiment is mere conjecture. So let's look at the gold chart. I do have a technical way of valuing gold.

My method:

Since gold can be viewed as a currency I plot the ratio between gold and the US Dollar in the middle panel of the chart. In the upper panel I chart the relative strength of the ratio. When we get a reading of around 80 on the upper panel gold is considered overbought; this has proven to be a good time to sell in the past. We are not there yet. Based on the chart we will continue to hold gold.

I might add and will address in the future that Silver and Gold Miner are a very different issues that require different evaluation methods.

(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.

Tuesday, July 26, 2011

Market Comment 07 26 2011

THE US GOVERNMENT IS NOT GOING TO DEFAULT ON DEBT OBLIGATIONS!

It only takes a couple hundred billion to service the debt obligations of the US. We have plenty of money to cover interest payments on treasuries as well as social security payments and most other entitlements.

The real risk is that the economy would be slowed down by the curtailment of non-essential spending.

There is no doubt that the bickering in Washington is causing the high volatility in the market. I have carefully repositioned all model portfolios in an effort to help us weather this volatility; so far so good.

If an agreement to lift the debt ceiling is not made by Aug. 5th volatility very well could increase. Bear in mind that one man's volatility is another man's opportunity. As the deadline draws nearer I may raise some more cash. I would be a buyer on a dip.



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.

Friday, July 22, 2011

First Follower: Leadership Lessons from a Shirtless Dancing Guy

The crowd behavior exhibited in the attached video parallels investor behavior as new bullish trends emerge. The investment management tools I now have at my disposal will help us to be early followers. Click on the text link below to view this great lesson in human behavior.


http://www.gerritzwealthmanagement.com/first-follower-leadership-lessons-from-dancing-guy/

Wednesday, July 20, 2011

Economic Catastrophe Averted?


"Without immediate action to raise the debt ceiling, the government will be forced to delay payments on federal obligations we owe. This means failing to pay our troops, delaying Social Security checks and issuing IOU’s instead of Medicare payments to hospitals and doctors. Default would affect 70 million Americans. It sends a signal to the world that the Treasury bond is no longer the world’s most reliable investment — endangering the savings of every American."

"If we fail to raise the debt ceiling, the result will be an economic catastrophe."

News that US politicians are close to an agreement on the debt ceiling brings a sigh of relief to beleaguered markets. It is my opinion that a US debt default could result in disaster for the markets on the magnitude of the Leman Bros collapse.

Prudence dictated that I reduce exposure to equity markets until a resolution to the crisis was likely.  A resolution does indeed appear to be at hand. I will begin carefully adding back equity positions. A deal is not signed as of yet so prudence is still called for. Congress has bungled these type of things in the past, i.e., the delay of the passage of the TARP bill during the subprime meltdown.



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.

Monday, July 18, 2011

All That Glitters is Soaring

Our Gold (GLD), Goldminers (GDX) and Silver (SLV) ETFs are ripping higher. These positions are helping offset declines in our equity holdings.

While the share price of IWM (small cap etf in our Long/Short Folio) is declining we remain above our stop price for the moment. IWM is still on a buy signal. Long/Short Folio holding GDX still remains a buy.

Given the current extreme volatility we are holding up very well.

Addendum:

The first stop for IWM was finally hit later on Monday the 18th. 50% to 100% of the position was sold depending on the account type and timing of the original purchase.

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, July 17, 2011

Market Comment 07 17 2011

The market has been in a very choppy trading range much of the year. On the S&P 500, the upper boundary is 1370 and the lower boundary is about 1250. We are currently in the middle of the range. This coming week should provide us with more clues as to whether the market will break one way of the other.

Our market direction model is getting close to a sell signal. If the market is weak this week the model will likely issue a sell signal. For now, we remain in cautious buy mode.





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.

Friday, July 15, 2011

Tick-Tock Tick-Tock

Jamie Diamond, JP Morgon CEO, recent quotes:

"It's imperative that the U.S. raise the debt ceiling."

"No debt resolution will cause severe market reaction."

"It is irresponsible to take a chance on a U.S. default."

Ron Paul Video on US Debt debate - click the link below:

http://www.gerritzwealthmanagement.com/tick-toc-tick-toc/

Thursday, July 14, 2011

Debt Ceiling Debate - Unresolved

The market has been anticipating a resolution to the debt ceiling issue, but the large players are getting nervous. Investors will likely flee the market if we do not get a positive outcome shortly.

Google reported blowout earning on Thursday and should be a catalyst to move the market up Friday. I am inclined to scalp some profits Friday afternoon, especially if progress is not made on raising the debt ceiling.

Politicians may bring us to the brink of default. The debt limit has been raised some 70 times in the past, but given the somber looks on the politician's faces there is a chance that a timely resolution may be delayed.

Tuesday, July 12, 2011

Market Comment 07 12 2011


The S&P 500 fell 1.8% and closed just above its 50-day line. Meanwhile, the Nasdaq shed 2%. Both indices suffered their biggest losses since June 1.

The focus now seems to be on the Italian debt problem, evidently the new European debt flavor of the week. Additionally, the unresolved U.S. debt ceiling debate continues. My expectation is that these concerns will be resolved with some kind of short term fix before long.

While I will and have trimmed some positions, I believe this dip is not reason for great alarm; rather it could provide a buying opportunity. At the moment (Tuesday morning) the market has touched and bounced off the 50 day moving average. The market is still in a trading range. The S&P 500 extreme lower boundry is the 1295 level and is the likely to hold.







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.

Monday, July 11, 2011

Market Comment 07 11 2011

A disappointing employment report was the catalyst for a Friday morning market selloff.  A late day rally into the close pared the market losses, but equity futures foretold today’s weakness.  That being said, the market still has substantial bullish potential. Earnings season begins today. Analyst expectations have been lowered over the past few months such that surprise potential favors the upside. Accordingly, the market remains in the bull's court. Earnings will be the key.




(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.


Saturday, July 2, 2011

The Gerritz Letter

The July issue of The Gerritz Letter has been published. It should be in your mailbox now.