Tuesday, August 2, 2011

Market Comment 08 02 2011

On Monday the market gapped higher based on an expectation that a resolution to the US debt ceiling crisis  was at hand. The market began to fade that gap from the start of trading. About an hour later we got the news that the ISM numbers (a measure of industry productivity) were far worse that expected. The market then not only gave back all the gains but went on to loose another 60 S&P 500 points.

The fireworks in Congress were really a smoke-screen hiding the real problem for the market; it's the economy stupid. The ISM numbers were revised down to just above 50; a reading below 50 represents a contraction. Can you say double dip?

So today as they pass the debt ceiling bill the market falls by over 250 Dow points. The market has now been down for 8 days in a row. This has not happened since the 1970's.

The next critical data point is the employment report due out on Friday. The market seems to be discounting a bad number here as well.

The small equity positions we actually held were stopped out in the last couple days. (XOP, XES, RWX, BJK, IWM, RSX) See Smart Stops table below:

(Click on chart for easier viewing)


Strong performance in our new bond holdings, Swiss Francs ETF (FXF), and gold ETF (GLD) not only protected us, but helped deliver positive returns today.

I will be looking to the GMW Market Direction Model (MDM) for a potential signal change. We have been getting close to a medium-term sell or short 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.

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