On Friday the stock market fell sharply despite good earnings reports from Bank of America, Google, and General Electric. In the afternoon news came out that the SEC is investigating Goldman Sachs for selling subprime instruments without disclosing to their buyers that they had an interest in a hedge fund that was shorting them.
A one day market decline does not make a trend. We will have to wait to see what transpires this coming week to make a judgment as to the extent of damage done to the current uptrend. If support levels for our equity holdings are breached we are prepared to sell.
As the week progresses, the market will reveal it’s true strength or reinforce those that have been skeptical about the underpinnings of this bull market. Either way, we are monitoring the situation and are prepared to act if necessary.
Sunday, April 18, 2010
Tuesday, April 13, 2010
Oppenheimer Floating Rate Fund (XOSAX)
If you hold Oppenheimer Floating Rate fund in your account you would have received a tender offer for 25% of your shares. Just disregard this notice. No action is necessary.
This was offered to all Oppenheimer investors, but really only has a benefit for those investors subject to a sales charge. As a client of an investment advisor such as me, you never pay any sales charges, even for funds that charge a load to the general public.
Just discard the notice.
This was offered to all Oppenheimer investors, but really only has a benefit for those investors subject to a sales charge. As a client of an investment advisor such as me, you never pay any sales charges, even for funds that charge a load to the general public.
Just discard the notice.
Monday, April 12, 2010
Stocks follow interest rates
Are rising rates bullish or bearish for the stock market?
Those answering bearish may want to consider the chart below. Over the last five years, there appears to be a positive correlation between the 10-Year Treasury Yield ($TNX) and the S&P 500. Both rise and fall together. Also notice that rates led the stock market in July 2007 and December 2008.
Those answering bearish may want to consider the chart below. Over the last five years, there appears to be a positive correlation between the 10-Year Treasury Yield ($TNX) and the S&P 500. Both rise and fall together. Also notice that rates led the stock market in July 2007 and December 2008.
Sector Performance Update
The chart below shows the year to date performance of the 9 major sectors making up the S&P 500. Each sector is represented by their related ETF. Note the outperformance of the consumer discretionary sector (symbol XLY), the industrial sector (XLI), and the financial sector (XLF).
GWM client accounts currently hold XLY, XLI, and KBE which is a banking sub-sector of XLF.
I suggest you study this chart carefully as it will be used on a regular basis.
Last month's issue of The Gerritz Letter included a discussion of our sector rotation strategy. This chart illustrates the benefit of being invested in the best performing sectors.
What Does Exchange-Traded Fund - ETF Mean?
A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.
Investopedia explains Exchange-Traded Fund - ETF
Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does.
By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order.
One of the most widely known ETFs is called the Spider (SPDR), which tracks the S&P 500 index and trades under the symbol SPY.
GWM client accounts currently hold XLY, XLI, and KBE which is a banking sub-sector of XLF.
I suggest you study this chart carefully as it will be used on a regular basis.
Last month's issue of The Gerritz Letter included a discussion of our sector rotation strategy. This chart illustrates the benefit of being invested in the best performing sectors.
(Click on chart to enlarge it for easier viewing)
ETF - Exchange-Traded Fund
What Does Exchange-Traded Fund - ETF Mean?
A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.
Investopedia explains Exchange-Traded Fund - ETF
Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does.
By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order.
One of the most widely known ETFs is called the Spider (SPDR), which tracks the S&P 500 index and trades under the symbol SPY.
Sunday, April 11, 2010
Market Week in Revue
The market closed out the week higher despite a mid week pullback. Bulls continue to buy any weakness, and what looked like the beginning of another pullback quickly vanished. The markets have been on a tear since February and have remained well above their 20 and 50-day moving averages the entire time. In fact, the market indexes have not closed under their 10-day moving averages for several weeks. Despite the strength, there are some cracks starting to show, so a little caution is called for moving forward. While a bearish stance would not be appropriate considering the price action over the past year, now would not be a prudent time to be chasing the market higher. After the market digests some of these gains I will look to add to positions on weakness.
Pullback
What Does Pullback Mean?
A falling back of a price from its peak. This type of price movement might be seen as a brief reversal of the prevailing upward trend, signaling a slight pause in upward momentum.
Investopedia explains Pullback
Often pullbacks are seen as buying opportunities after a security has had a large upward price movement. It is important, however, to analyze closely any pullback as it may be a sign of a definite trend reversal or a slight pause in the upward trend, each having very different trading implications.
Moving Average - MA
What Does Moving Average - MA Mean?
An indicator frequently used in technical analysis showing the average value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance.
Investopedia explains Moving Average - MA
Moving averages are used to emphasize the direction of a trend and to smooth out price and volume fluctuations, or "noise", that can confuse interpretation. Typically, upward momentum is confirmed when a short-term average (e.g.15-day) crosses above a longer-term average (e.g. 50-day). Downward momentum is confirmed when a short-term average crosses below a long-term average.
(Click on chart to enlarge it for easier viewing)
Pullback
What Does Pullback Mean?
A falling back of a price from its peak. This type of price movement might be seen as a brief reversal of the prevailing upward trend, signaling a slight pause in upward momentum.
Investopedia explains Pullback
Often pullbacks are seen as buying opportunities after a security has had a large upward price movement. It is important, however, to analyze closely any pullback as it may be a sign of a definite trend reversal or a slight pause in the upward trend, each having very different trading implications.
Moving Average - MA
What Does Moving Average - MA Mean?
An indicator frequently used in technical analysis showing the average value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance.
Investopedia explains Moving Average - MA
Moving averages are used to emphasize the direction of a trend and to smooth out price and volume fluctuations, or "noise", that can confuse interpretation. Typically, upward momentum is confirmed when a short-term average (e.g.15-day) crosses above a longer-term average (e.g. 50-day). Downward momentum is confirmed when a short-term average crosses below a long-term average.
Thursday, April 8, 2010
Up Trends have Up Legs and Down Legs
The market has been in a low volatility uptrend. The market, however, never goes straight up; rather it has up legs and down legs.
An Up trend is defined as a series of higher highs and higher lows.
The recent uptrend will not last forever. At some point we will have a reversal and a down trend will develop. For the moment the uptrend remains intact.
An Up trend is defined as a series of higher highs and higher lows.
The recent uptrend will not last forever. At some point we will have a reversal and a down trend will develop. For the moment the uptrend remains intact.
Thursday, April 1, 2010
The Gerritz Letter
The April 01, 2010 issue of The Gerritz Letter has been published. It should be in your email inbox now. If you do not see it, check your junk or spam mail folder and mark it as not junk mail.
Click the following link to have a free copy
of The Gerritz Letter delivered to your email inbox monthly.
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