Friday, September 28, 2012

Weekly Market Review

Market Snapshot

Market in Correction

Chart View

Yesterday's bounce was faded today,
giving us a weak close to a good month

Tuesday, September 25, 2012

Market Comment 09/25/2012

Market Snapshot

The market could break either way from here.

Chart View
S&P 1500 Composite Index

The market closed in the middle of the Bollinger Bands, right at the 20 Day Moving Average.
The Market Snapshot pie chart paints the percentage of stocks  above the
20 DMA green and the percentage of stocks below the 20 DMA red.
Remember Green is good and red is bad.

Market Direction Model

The market has been drifting lower for more than a week now.
The market rose earlier in the day only to sell off strongly in the last hour of the trading  day.

Today's pullback was partly due to comments by Philadelphia Federal Reserve President Charles Plosser. He said that the Fed’s recently announced third round of quantitative easing is not likely to do much to benefit growth or employment.

Basically, the market had become very overbought and a pullback is to be expected. This is all part of the normal ebb and flow of the market. Intermediate term I remain bullish, but short term the market is bearish.

Tuesday, September 18, 2012

Blame Congress for Problems in US Economy: Fed's Fisher

Click the link below to view a brief article featuring QE-3 comments by Dallas Fed President, Richard Fisher.

The Fed has done about all it can. Congress now needs to start earning their pay.

Sunday, September 16, 2012

Weekly Market Review 09 14 2012

Friday 14, 2012

Market Snapshot

The Market is now very overbought and
a pullback should be expected before too long.
This will be another buying opportunity.

Investor's Business Daily

A Follow-Through-Day
is Investor's Business Daily's
version of our Impulse Indicators.
It is confirmation of a new intermediate term
bull market phase that should have some legs.

Market Direction Model

Our Impulse Indicators fired on 09/06/2012,  a week before
IBD's FTD.  Our Impulse Indicators beat the FTD to the punch on a regular basis.

The potential impact of Ben Bernankie's quantitative easing decision was tremendous. Had he not announced the implementation of a new QE program the markets would have crumbled under the weight of the current worldwide economic slowdown. The market had been bid up in anticipation of QE-3. Out of prudence I reduced our risk exposure just prior to the announcement due to the high risk nature of the event. 

In the end, Bernankie delivered on QE-3 in a very big way. I got all GWM model portfolio fully invested very quickly after the decision. I loaded up on those asset types that showed the greatest relative strength in the initial move., i.e., energy, basic materials, home builders. etc.

The market is now even more overbought than before on a short term basis, so a pullback should be expected. Any dip should be shallow and investors will step in to buy those dips going forward. I will lighten up just a little and buy any and all dips right up until the presidential election. We are in an intermediate bull market phase.

The majority of money managers, including myself, have under-performed the market indexes in the crazy and volatile market we have had this years. This our chance to catch up. 


Ian Woodward, market analyst and HGSI group mentor, provided us with an updated assessment of the market late this afternoon. Ian said and I paraphrase "There have been only a couple times in the last 12 years when the market has been this over-bought, July 2011 and October 2011." Ian thinks the market could possibly begin a pull-back in eight to ten days and definitely within 15 days. Below is a chart showing how the market corrected in July/August and then October/November of 2011 after being this over-bought.

S&P 500

Ian also reminds us that this is the 4th year of the presidential cycle and the market does not tank in an election year.

Based on Ian's comments, I now think it may be prudent to begin reducing our risk exposure a bit more than I originally thought. I do want to have some cash on hand if we do get a little deeper correction.

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, September 8, 2012

Weekly Market Review 09 07 2012

Market Snapshot

Nearly 35% of  S&P 1500 Index stocks
are now above the top Bollinger  band.

S&P 1500 Composite Index
Chart View

The two outer lines are the Bollinger Bands.
Historically, prices remain confined within these bands
89% of the time.

Ian Woodward, market analyst and  HGSI group mentor, was very quick in posting a timely blog about the market's valuation after the big move up late last week. I have spoken many times about this very gifted octogenarian over the last couple years; he is a real treasure to all of us in the HGS Investor group.  Ian turned 81 last week. Happy Birthday to Ian. Whenever there are important things going on in the market Ian wastes no time providing us with in-depth analysis. 

Thursday's big market move was prompted by Central Bankers telegraphing their next moves; U.S. quantitative easing is imminent and the ECB is talking about buying an unlimited amount of the bonds from troubled Euro Zone countries.  Ian says the market is now very, very overbought on a historic basis. He said there have been just a couple times in recent history that have even come close to registering such extraordinary  internal readings. That was on 11/04/10 and 03/13/2012. In both 2010 and 2012 the market stayed up for another 4 days after becoming this overbought before starting to correct. He added that, with an explosive move up like this, it takes a few days for the euphoria to burst.

In addition to U.S. and European stimulation expectations, China has hinted at a round of stimulus as well. This caused a rapid rotation into risk on style assets such as the metals and basic materials. 

We will want to rotate into these growth sectors, but only after some of this euphoria is dampened. This coming week will be a good time to take some profits and wait a little before jumping in.

The Presidential Election Year Cycle

I talked about the Presidential Election Year seasonal effect on the market in the August issue of The Gerritz Letter. So far we are tracking the Presidential Cycle Pattern road map perfectly.

So far so good!

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, September 6, 2012

Dow Soars Nearly 245 Points

Market Snapshot

The Bulls Charge and the Market Soars

Click on the charts for easier viewing

Chart View

S&P 1500 Breaks Out to the Upside

Market Direction Model

Upside Impulse Indicators Fired today
The Whole Bottom Row is Painted Blue (Very Bullish)

Good news out of Europe triggers a huge global rally. 

According to Draghi, the ECB now stands ready to buy an unlimited amount of bonds from troubled Euro Zone nations, i.e., Spain. Spanish bond yield dropped to the 6% level and Spanish stocks rise over 5% on the news.

News of bond buying program set off today's big rally in the US.

While not 100% invested, the GWM Model Portfolios were positioned quite well to benefit from today's big move. We were in the right sectors, i.e., financials, large tech and homebuilder.

The Jobs report is out tomorrow morning. Normally this is a market moving report, but it really may not matter if it is good or bad.  A bad report would suggest that QE3 would be coming sooner rather than later and a good report would confirm improvement in the economy. Either way investors win.

The Chart View of the S&P 1500 above shows that volatility had contracted to a very low level. When the Bollinger Bands get closer together volatility is contracting. We call this a volatility squeeze. We know that volatility will expand before long, causing the Bollinger Bands to spread out again. We don't know which direction the market will move in advance, but we know it will make a pretty good move. The breakout was to the upside; a bullish sign for sure. This is our signal to add to our equity positions.

The Market Snapshot looks overbought right now, but I think that is a result of the volatility squeeze reversing so abruptly. I'll pose that question to the HGS Investors forum.

Precious Metals

Gold closes over $1,700 today.

In anticipation of a new round quantitative easing worldwide, precious metal have broken out once again. GWM Model Portfolios hold both gold and silver.

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.

Update on Lt Christopher Gerritz

Lt. Christopher Gerritz

Lt. Christopher Gerritz has been an associate registered investment advisor with our firm for a number of years. For benefit those of you that know Chris and are familiar with his medical condition, a rare neurological condition attacking primarily the nerves in his left hand, I am posting an email that he just sent.

Retired at age 27

Hello again everyone,

Just received word that my Medical Evaluation Board (MEB) has been finalized.  The Air Force has decided it is going to medically retire me with 40% disability rating (small pension + medical coverage of existing conditions).  I have the option to appeal, which I intend to do, that will give me 6-8 months to fight the decision.

It's been a good run.  9 years in the Air Force.  Enlisted, Airman of the Year in 2005, Selected for an enlisted commissioning program which paid for my Electrical and Computer Engineering degree at Oregon State University, 9 months flying (70 hours), a year at the Air Force Computer Emergency Response Team (AFCERT) defending the AF from hackers, etc.  Currently I am serving as the Lead Crew Commander for the AFCERT, they're fighting to keep me and are pushing me to apply for their open GS civilian positions.  I've made a lot of good contacts, learned a lot about the cyber security field, and had a blast doing it.  Funnest and most fulfilling job I've ever had.

Not sure right now what i'll do but i'm not without options.  Putting together my resume right now, if anybody has any leads/ideas for hiring companies, i'm interested in management, project management, information assurance, network security, intrusion response, etc.  I'm not interested in just pushing a product or making money; i want to make a difference, accomplish something, or build something.  

Christopher Gerritz
San Antonio, TX

Tuesday, September 4, 2012

Market Comment 09 04 2012

Mixed Markets - Some Up & Some Down

Flexible Income Market

The Flexible Income Sectors have been problematic as of late.
Consequently,  we are currently maintaining a
high cash position in the Flexible Income Folio.