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

Follow-Through-Day

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. 

Addendum:

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

2011

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.