Monday, November 26, 2012

Seasonality - Market Sweet Spot

Mark Twain, was quoted as saying:

 "History does not repeat itselfbut it does rhyme."


If history is our guide, we are, from a seasonal perspective, in the sweet spot for the markets. 

Since 1950, 94% of the year's average gain, a little over 8%, could have been obtained between October and April.

Even with the recent market correction, we remain in a cyclical bull market and could make a new high in the months ahead. That being said, increased market volatility should be expected as politicians begin debating a resolution to the Fiscal Cliff.

I will be publishing  The Gerritz Letter on a quarterly basis from now on. I will keep you up to date via my blog, Gerritz InSights, as usual, but a little less frequently; I want to take the focus off the short term, in favor of taking a longer term perspective.

I think we can capture better returns by being willing to endure a bit more volatility. The key is to carefully select investment positions that have the strongest fundamentals, i.e., strong earnings growth and relative strength in the top ranked industry groups (ERG). The winners will ultimately get rewarded.

High frequency trading coupled with market moving news events have resulted in an environment were share prices move extremely fast; this is not your father's market. 

I have the tools to identify the best investment candidates as well as a support network comprised of brilliant market analysts and individual investors that have a real passion for the markets. 

The Daily Snapshot and the GWM Market Direction Model provide us information about the condition of the market. I think they are effective at demonstrating the ebb and flow of fear and greed in the market. If you follow these very visual portrayals of the evolution of the markets over time, you get a good sense of the rhythm of the markets. Market fluxuations are normal and should not be of concern; it is at the extremes in valuation however that warrant our attention. This is the point where investors gain or loose the most money.

Ian Woodward, HGSI analyst and group mentor, provides us with this important graphic depicting the emotions of investors during evolving market cycles.



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Market corrections should be viewed as opportunities to load up the boat.
They are also the most difficult time to invest because
we are naturally most fearful. Fight the fear.

Warren Buffet once said something like:


"Be fearful when others are greedy and be greedy when others are fearful."






Friday, November 23, 2012

Market Comment 11 23 2012



Market Snapshot

63% (green area) of the stocks in the S&P 1500 Index
are now above the mid-point of the Bollinger Bands.
This is a positive.

Chart View
S&P 1500

We had two big up days this week.


Market Direction Model

Another strong day helps move us up out of the doldrums. 


I hope all of you had a nice Thanksgiving Day.  I personally love this time of year. I already have my Xmas wish list prepared.

All I want for Christmas is a Santa Claus Rally.



Addendum (Saturday Morning):

Friday was an abbreviated day with an early close. Even though we had a very strong day I was unclear as to if it qualified as an official Follow-Through-Day. Well , Investor's Business Daily confirmed that it was, in fact, a Follow-Through-Day and has changed the market status to "Market in a Confirmed Uptrend." 

"While not all Follow-Through-Days result in a sustainable rally, all sustainable rallies start with a Follow-Through-Day."

Our indicators really worked superbly this fall, helping us minimize the damage from the sizable correction that began on September 15th.  I turned cautiously optimistic Friday, a week ago, and began adding new equity positions. We are nearly fulling invested now in the right kind of stocks, high growth stock leaders.

Core Equity Folio Holdings



New America Folio Holdings





- Here Comes Santa Claus - Here Comes Santa Claus -


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, November 20, 2012

We Got Our Bounce



Market Snapshot

Oversold condition relieved.


Chart View

Nice Bounce

Market Direction Model

Strong buying lifted the markets to a neutral condition
with a positive short-term bias.


I added to our equity exposure more aggressively due to the strength of the markets yesterday. We now will look for a Follow-Through-Day to confirm  a new bullish leg up.  We are entering the seasonally strong part of the year, however, seasonality will be trumped by politics as congress begins to deal with the Fiscal Cliff issues.  For now, I have one foot on the gas and the other on the brakes.


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, November 19, 2012

Possible Short-Term Bottom In on Friday 11/16/2012

On Friday the market may have put in a short term bottom.  After a 12% decline from the September 14th high in the NASDAQ Composite Index we are looking for a bounce.

After sinking in the morning the market rallied back to close near it's high on Friday. This is a positive. Additionally, our bottoming indicator, which we call a Bingo (grey colored vertical line), is telling us that the market may now bounce back for a few days. I will take some small equity positions for a short term hold. I will monitor them carefully as we are still in a downtrend.


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NASDAQ Composite Index

The grey colored vertical stripes are our bottoming indicator at work. We call this indicator a "Bingo".
The market may have put in a short term bottom.


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, November 17, 2012

The Fiscal Cliff

- What going over the Fiscal Cliff would mean - 

Sources: Moody's Analytics, Tax Policy Center. By Bonnie Berokowitz, Karen Yourish and Laura Stanton - The Washington Post. Published on November 11, 2012, 5:24 p.m.


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Thursday, November 15, 2012

Market Getting Oversold 11 14 2012



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Market Snapshot

Oversold


Market Direction Model

Our sell signals proved to be right on.


Chart View

The Market Direction has been down since mid-September.



The market is getting oversold. We should expect a bounce soon. If a meaningful bounce does not transpire, the odds increase that we would be entering a cyclical bear market.


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, November 12, 2012

Market Comment 11/12/2012

The market topped out in mid September. Since then the NASDAQ Composite Index is down nearly 10%. We are now sitting at a crossroads. Either we get a bounce soon or the floodgates open and the market accelerates to the downside.

At this point GWM Model portfolios are holding only gold, which has begun to show signs of life, and bond and flexible income investments. We are very defensive at the moment.

Better than 70% of the time, the market safely recovers from a correction that is limited to 8% or less. When a correction exceeds 8%, as it has now, it is really anybodies guess as to how much further the market could decline. A confirmation of increased bearishness would be a sharp rise in volatility; strangely enough volatility, as measure by the VIX index, remains relatively low.

Ian Woodward, market analyst and HGSI mentor, provided our group with the following historical study. It gives us the odds for various percentage corrections. It is a 35 years study of past corrections.


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NASDAQ Market
Percentage Corrections over 35 Years

Analysis by Ian Woodward
The market should bounce later this week. If it does not we have trouble right here in River City.


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, November 8, 2012

The Market Tumbles on Wednesday


The Dow Jones Industrial Average tumbled over 300 points on Wednesday.


Market Direction Model




Sell Signal
Chart View


Red long line represents a strong sell signal.

We had little equity exposure going into Wednesday's big decline due to the previous sell signal we got last month. We are currently net short the market. 



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.