Market Comment 09 21 2011

For the past couple weeks I have been patiently awaiting the Federal Reserve's announcement on their next course of action to help our ailing economy. Well, we got the news today and the market did not like it. The Dow Jones Industrial Average dropped over 283 points.

In a plan named "Operation Twist", the Fed plans on changing the composition of their balance sheet over the next year or so by selling short dated maturity treasuries and buying longer term treasuries and in particular mortgage backed issues. I think the intent is two-fold; one, to help lower mortgage rates, and two, to pressure banks to loan more money to customers.


All GWM Model portfolios should show a gain today due to our predominant positions in high quality bonds and US Gov treasuries. Additionally, our positions in RWM and EUO made money. RWM is an inverse small cap ETF and EUO is a leveraged pairs trade ETF that goes long the US Dollar while shorting the Euro. Apple and Amazon gave back just a fraction. After gaining big yesterday, GDX, our gold miners ETF, gave back about 2% today.

The market has been too volatile lately to get committed in a big way to either the long side or the short side. September, which is historically the worst month of the year for stocks, will soon be in the rear view mirror. The market usually bottoms in October, which sets the stage for the seasonally strong part of the calendar, November through April.

The benefit of watching the market closely during times of distress is that the really strong investment candidates reveal themselves. The stocks that held up the best throughout the turmoil will make up my high conviction buy list when the dust settles.

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