Sector Performance Analysis for 4 Week Period Ending 06 17 11

No place to hide. This is why we have carried a relatively high cash position in all GWM Model Portfolios lately.

The decline has been very orderly, perhaps too orderly. What we need is a good dose of fear to washout the sellers and set the stage for a reversal to the upside.

Lots of expected news next week that will have an affect on the markets. The Greek issue remain a key focus. I believe a short term resolution to the problem is at hand. If not lookout below. The big issue here is not Greece itself but the fact that the European banking system owns so much of their soverign debt. Add to this that Ireland, Portugal and Spain are right behind. A Greek dept default could create a domino effect that would have global ramifications.

Our early indicators are pointing to another bounce if not a short-term trend reversal. We are at very important support levels on the S&P 500. It could go either way. I will be watching closely.

Major Markets Weekend Update

Oil and commodities were down big last week while the US Dollar was slightly down. This is unusual because they generally are inversely correlated.

The stock market finally broke its 7 week loosing streak but did so with a very whimpy gain of just +.04%.

Gold is beginning to shine once again.

Last Weeks performance

S&P 500        +.04%

Silver              -.90%

Gold              +.48%

Oil                - 6.5%

US Dollar     +.22%

CRB Index  -3.56%    This is the commodities index

S&P 500 Touches and Bounces Off 200 DMA

It was a text-book perfect technical bounce; the market (S&P 500) tagged its 200 day moving average on Thursday and bounced perfectly.

Futures are pointing to a big up opening for Friday morning as well.  This word of caution however; the market rarely bottoms right at the 200 day moving average. The bottoming process is generally a messy process and rarely a neat and highly predictable one day event. We remain cautious and more inclined to sell into rallies rather than be buyers on bounces at this point.

(Click on chart for easier viewing)

 
 

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.

Market Comment 06 15 11

Today the S&P 500 retraced all of yesterday's gains and then some.

We can not control the market, but we can control what we do. We continue to maintain minimal exposure to the stock market. We have also slowly upgraded the quality of our bond/ income holdings.

We are approaching major areas of potential support, the 200 day moving average and the March lows in particular. How the market responds at these levels should be very telling.

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

GWM Bond/Income Fund Management System Generates a Sell Signal

After holding Metropolitan West High Yield Bond fund (MWHYX)  for quite some time we finally got a sell signal. This was the last junk bond fund that we were holding. Only Shareholders Service Group accounts held MWHYX.

When the share price (red line) crosses below the smoothed blue line (50 day moving average) a sell signal is generated. The small green dart in the lower right corner of the chart is the actual buffered sell signal. As per our sell discipline MWHYX was sold in all accounts.

(Click on chart for easier viewing)

 

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

Behold The Bounce

This is what a bounce looks like on a 10 minute chart. (each candlestick = 10 minutes)  As I write IWM is up 2.25% so far on the day. With its timely buy signal, the IWM robot once again did a great job.







IWM's share price has moved up sharply on very good volume.

(Click on chart for easier viewing)

If the gain holds into the close we may rally for a couple more days. My personal inclination is to take some profits on strength in the current environment; so, adding a little descretion, I will sell one half of the position in IWM and hold the rest as until the next robot signal.

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.

Russell 2000 Small Caps -Volatility - Buying the Dip and Robots

I have added a new folio to some of the GWM Model Portfolios. This folio is labeled "Long/Short". The distinguishing characteristic of this folio is that it can play both uptrends in the market (long = owning assets that benefit from the market going up) and downtrends in the market (short = owning assets that benefit from the market going down).

Another important aspect of this folio is its reliance on an algorithmic based trading system sometimes referred to as a robot. It has been reported that as much as 70% of trading volume is now generated by such computerized systems. The robots I use were designed to focus specifically on one market sector alone. Currently I have access to two such robots developed by Pascal Willain, author of Value in Time, published by John Wiley and Sons, Inc. The first is the GDX robot and the second is the IWM robot.

The biggest enemy to investors is their own emotions. The fact that robots have no emotions gives them an edge.

On Friday I took a small position in IWM (Russell 2000 small-cap index ETF) based on a strong buy signal from the IWM robot. The following is an analysis of the trade:

• Strong buy signals are given a 1:3 risk/reward ratio. The robot recommended stop is just 2% below the recommend entry price.  This means that for every dollar at risk you have the potential to gain three. For example: $10,000 invested - amount at risk (potential loss at stop) = - $200 -- target gain = $600.
• Technical analysis - Increase in volatility (Wall Street double talk for prices declining)  -  IWM has declined by 9.71% since its April 29th high.
• IWM is extremely oversold - stocks tend to rebound from an oversold condition (bounce up)

(Click on chart for easier viewing)

The robots I am using have shown very good results in all market conditions based on actual trades and backtest studies. The key is to maintain discipline in following the signals. The results show a greater than 70% success rate.

Previously I was going to add the Long/Short robot folio to aggressive accounts only.  I more recently determined that most GWM investors could benefit by having it due to the up and down nature of the markets. Position sizing and risk is still overwhelmingly determined by GWM Model Portfolio selection; the Golden Years Model has the least risk exposure; the Go Getter Model has the most exposure.

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.