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.