Thursday, May 31, 2012

Daily Market Snapshot 05 30 2012


(Click on charts for easier viewing.)

(Then click the large white X in the upper right corner to return to the blog)

Daily Market Snapshot

The market is deteriorating again

Chart View
S&P 1500

This type of pattern formation (bear flag) can
be viewed as a continuation pattern, meaning more downside to come.


Market Direction Model
The market can not sustain a rally.


The Woody Indicator
(Volatility Indicator $VIX)

Back in the Danger Zone

The market is deteriorating. I will substantially reduce risk in all GWM Model Portfolios Thursday morning. Each bounce attempt has been very short lived. The news out of Europe and continued reports that point to slowing economic activity worldwide are definitely constraining this market. I think we need to ride this out in the safety of high quality bonds and defensive positions only.





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, May 30, 2012

Daily Market Snapshot 05 29 2012



 Daily Market Snapshot

Red is bad and Green is good
 

Market Direction Model


The absence of  blue impulse indicators on the left side of the MDM
show that today's up move was not as strong as it appeared to be.
Caution is still called for.


Trendline Analysis

S&P 1500 Composite Index

The European recession/depression and debt crisis is likely to be the tail that continues wags the dog until the Greek elections on June 17th. Until that time we can only speculate on the future of the Euro. For now the Euro is dropping like a rock as the US Dollar continues to strengthen. This has been the reason for the dramatic drop in all commodity prices recently.




Addendum:   European Youth Unemploymnet Rate

European Youth Unemployment Skyrockets



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, May 25, 2012

Daily Market Snapshot 05 25 2012


(Click on charts for easier viewing)
(Then click the large white X in the upper right corner to return to the blog)


Daily Market Snapshot

The Daily Market Snapshot illustrates the condition of the market,
 as measured by the S&P 1500 Index stocks, for just a single day.

We had a down day today as the bears gained the upper hand.


Market Direction Model

The Market Direction Model (MDM) illustrates the market condition
as it evolves over consecutive market days.

Green = Bullish
Yellow = Nuetral
Red = Bearish

All U.S. markets improved for the week starting 05 21 12.


Trendline Analysis
S&P 1500 Composite Index





The Woody Indicator
 (Volatility Indicator $VIX)



The Woody Indicator gives us a read on mood of the market.
It measures and magnifies investor emotions,
fear and greed, as well as volatility.

While volatility has come down somewhat, fear remains at a high level.

The Woody Indicator is still in the Danger Zone.


Have an enjoyable Memorial Day Weekend.


Stephen


ps: I am now back in Medford.



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, May 19, 2012

Facebook IPO Disappoints

On Friday Facebook (FB) had its initial public offering (IPO). It opened up at $38 per share. It traded up to over $45 per share then slid throughout the day, finally closing at just $38.23. After all the hype, this was really a less than glowing outcome. Throughout the day the $38 level was not breached. Late in the session, the share price rapidly vacillated back and forth between $38 and $38.01 for a very long period of time. The selling syndicate was compelled to not let the price drop below its initial offering price in the secondary market; they succeeded in that effort. They had to continually buy back shares to support that $38 price. They were probably relieved when the market finally closed and their bleeding stopped.

The ability of the large institutions to control stock prices in the secondary market was clearly demonstrated with the Facebook IPO. This is the exact reason that I try my best determine what direction the large player institutions are trying to push a stock or the market.

I am sure that the current negative sentiment in the market in general had a large impact on the Facebook offering. But, I also think that both the general public and investors as a whole are much savvier than in the past and are less willing to blindly jump on the hype bandwagon. There is no doubt that Facebook has had an amazing impact on world. I will be watching closely to see how it trades in the next few weeks. Longer term it very well may make investors wealthier. For now it has just made Facebook employees and FB's venture capitalist wealthier.

Stephen


Addendum: Why FB would not fall below $38 on opening day



Massive bids from the selling syndicate at $38 provided a
rock solid line of support for FB shares in the after market.
They did not want to suffer a black eye from shares selling below
the offering price on the first day.

Friday, May 18, 2012

Market Condition = Oversold



Daily Market Snapshot
S&P 1500


Market is now Oversold
 
S&P 1500 Index
Chart View



 
After yesterday's big sell-off the broad market, as represented by the S&P 1500, is now down over 8% from it's recent highs. The S&P 1500 Index is now within a few points of wiping out all of it's 2012 returns.
 
Based the current market snapshot the market is oversold and due for a bounce. Today, Facebook is having it's initial public offering, the most anticipated IPO in history. Futures are indicating that we will indeed get a market bouncer this morning. The nature of this bounce will be very telling. If the bounce is strong and holds thoughout the day there may be some hope that the correction has run it's course.
 
Ian Woodward, market analyst and HGS Investors forum mentor, in his usual colorful language, says we are at Custer's Last Stand. We either get a meaningful bounce that represents institutional sponsorship across many sectors or the floodgates open up and the market sinks further.
 
All GWM Model Portfolios currently have little if any exposure to  the equity market. In other words, we are safe.

The Woody Indicator
 (Volatility Indicator $VIX)

Volatility has increased as the market has corrected.


I want to remind you that this is not the end of the world or the stock market. It is a market correction. We will  want to re-engage when volatility subsides and our indicators give us the all clear signal.  In the mean time we keep our powder dry.


Addendum: Flexible Income Folio

Our investment management methodology and investment selection process is all about comparing the relative strength of the universe of investment  alternatives. Simply put, we want to be invested in those assets that are showing strength while avoiding those assets that are showing weakness.

Below is a chart that depicts the performance of various investments that I take positions in from time to time in our Flex Income folio. BOND (blue line) and IEF (baby blue line) have clearly outperformed the rest.

We avoid the rest and invest in the best.

Trendline Analysis
Flex Income Folio candidates

(Click on the charts 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, May 16, 2012

What's Working?

Market Weakness Prevails









Canary in a Coal Mine
Apple, Inc.

Apple is our go-to canary in a coal mine.
So Goes Apple - So Goes the Market

Trendline Analysis



Trendline Analysis
NASDAQ

Just like Apple, the stock market in general continues lower.


Addendum: Inflation Hedges Folio


Natural Gas

Commodities have slid as the Euro currency has dropped and the US Dollar has risen. This should
continue until there is some resolution to the Greek / Euro Zone delema. The following is our Market Direction Model applied to assorted hard assets that we use to monitor inflationary pressures.

Note that Natural Gas is actually rallying.




Natural Gas has fallen to such a low level that it is now a compelling buy and
is in fact being bought as a true value play.
Trendline Analysis
Natural Gas (UNG)



I added to our existing position in the natural gas ETF (UNG). These low prices are indeed compelling.


Addendum 2 - Long/Short Folio:

I overweighted our holdings in Pimco Total Return ETF (BOND) . So, BOND is now held both in the Flex Income Folio and the Long/Short Folio.

Our stance on the market in general remains very defensive. I am comfortable with overweighting BOND and UNG as both are attracting money right now.




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, May 15, 2012

Daily Market Snapshot 05 14 2012




Daily Market Snapshot         


The Bears overwhelmed the Bulls
The Daily Market Snapshot and the the Market Direction Model clearly illustrate the condition of the market. We are in the midst of a market correction.







Market Direction Model

Market in Correction

Trendline Analysis
Nasdaq Composite Analysis


The 2900 support level in the Nasdaq Composite has held to this point.
The Nasdaq Composite is now down more the 7% from its March high. We are due for a bounce, however, I think that the 2900 support level could be broken soon due to the market's current focus on headline news out of Europe. If the 2900 support line does not hold we should expect a further move lower.

We continue to maintain a very defensive posture in all GWM Model Portfolios.


Flexible Income Folio Highlight:

Flexible Income Folio

Featured Holding

Pimco Total Return ETF (BOND)




The Pimco Total Return ETF (BOND) has performed very well since it's March 1st inception. It is 300 basis points ahead of the original Pimco Total Return mutual fund (the world's largest fund).

From Investment News:

"Since the Pimco Total Return ETF (BOND) was launched on March 1, it has had a return of 4.14%, while the mutual fund version has had a return of 1.17%. The Barclays Aggregate Bond Index, the traditional benchmark for intermediate-term bond funds, has returned 0.03% over the same time period."

"The secret to the ETF's success is simple. At a little over $800 million, the ETF is free to invest in Mr. Gross' best ideas — and only those — while the mutual fund, with $258 billion in assets, is forced to invest more broadly."

“It's a high-conviction portfolio,” said Scott Burns, director of ETF research at Morningstar Inc."


Trendline Analysis
Pimco Total Return




PIMCO TOTAL RETURN (ETF symbol = BOND)


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, May 9, 2012

Daily Market Snapshot 05 08 2012


Daily Market Snapshot       


Correction Continues

All GWM Model Portfolios housed at FOLIOfn currently have very high levels of cash. We currently have a defensive posture with positions in high quality bonds and just a few defensive equity positions.

GWM Model Portfolios housed at Shareholders Service Group (Pershing) are managed with a longer term perspective. A further deterioration of the markets will lead us to reduce risk exposure in these accounts as well.


Rydex Funds and Variable Annuity Managed accounts are 100% cash and bonds orcurrently.


Market Direction Model
Green = Buy
Yellow = Nuetral
Red = Sell
The market closed substantially off it's lows on Tuesday. This means that there is some interest in stocks at these lower levels.  Futures are indicating a lower opening on Wednesday. We will have to see if buyers step in to support the market later in the day. A bounce may be in the making. If so, I think it would be an opportunity to sell.

Addendum:

Here is what the markets are worried about.

With the movement against austerity programs in southern Europe there is a concern that the Euro Zone could splinter. This could cause a run on their banks as savers flee depreciating currencies. This is a big problem. Revolutions have erupted from lesser financial fiascos.


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, May 4, 2012

Daily Market Snapshot 05 04 2012



Daily Market Snapshot 


Green is good - Red is Bad


Market Direction Model

The MDM is flashing warning signs again. Lots of red on the bottom row.
Green is bullish - Yellow is nuetral - Red is bearish

The catalyst that triggered today's sell-off was the government employment report. The market was expecting 160,000 new job creations and we only got 115,000. A higher number would have confirmed better growth prospects for the economy and a lower number would have put pressure on the Federal Reserve to reinstitute monetary expansion with another round of quantitative easing (printing more money).

While not too hot - not too cold was fine for Goldilocks, it was not well received by the market. 

The right side of the MDM is starting to look like a Christmas tree, with alternating swaths of red, yellow and green. What is this telling us? It is revealing the current indecision on the part of investors. At the moment the market is news driven and the news can be unpredictable. Next week the spotlight will be on Europe and the French elections. Recent market action is disconcerting and is telling us we should take a more defensive stance right now.

It is often helpful to look back to see where we have been in the market to better gauge where we may be headed next. The rally that began on Dec.19th 2011 has run out of steam. The market is now going sideways in a very choppy manner. Will it chop around like it did last fall and then begin a new leg up? Or, will we experience a bear move to the downside like we had in August 2011? I don't know. The best we can do is to continue to rely on the same tools and methods that helped us avoid the 19%+ decline in Aug. 2011, the May 6th 2010 Flash Crash and the 2008 Bear market. 

For now the High Road Scenario I laid out in the May newsletter is being rejected.


Trendline Analysis
For the Nasdaq Composite Index
Aug 2011 - Present

Click  on the 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.


Thursday, May 3, 2012

Daily Market Snapshot 05 03 2012



Daily Market Snapshot



The market is expressing it's indecision about which way to go.
 It is now a toss-up.

Market Direction Model
 
 

Today's declines were worrysome.


Today's market action, especially in leading stocks, caused me stand up and take notice. The government employment report will be released tomorrow morning. This report is being highly anticipated and has the potential to tip the scales in favor of the bulls or the bears depending on the numbers reported.

The choppiness exibited in the market today is calling for a more defensive posture.

05/04/2012 Blog Addendum:

The employment report this morning was bad. We were expecting 160,000 new jobs and only got 115,000. the unemployment rate has deteriorated to 8.1%. As a result market futures have turned down. The High Road senario I discussed in the May newsletter has for now been rejected. I will take a more defensive posture as a result and reduce exposure to risk.





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, May 1, 2012

The Gerritz Letter

The Gerritz Letter has been published. It should be in your email inbox shortly. It is also available at the GWM web-site.

Stephen