The Sell-off Intensifies as The Fear Index Spikes Higher

The Bears have taken the lead.

Chart View

S&P 500

5 Days down in a row

Uptrend under pressure

Our Woody Indicator, which measures investor fear and greed, spiked dramatically higher on Friday.

Woodie Indicator

VIX Index

Investors accelerated their purchase of protective options(the VIX Index) in a big way.

We haven't seen this type of spike in volatility for some time. As the chart above indicates, we are now in an extremely high risk market. The chart is clearly telling us that it's time to "Run for the Hills."

As I mentioned in yesterday's blog post, all GWM Model portfolios are now weighted heavily in cash. If the politicians strike a deal on Monday, the markets will rally strongly. If they do not, the markets could drop a few hundred points. I prefer not to gamble on the outcome. Our indicators are definitely suggesting caution at this juncture. If we miss a strong bounce on good news, so be it. Given the poor track record of congressmen getting something done, I am inclined to error on the side of prudence.

You're a Mean One Mister Grinch

A flow of news flashes on Thursday provided for a lot of drama in the market. The market has now been down for 5 days in a row. The Grinch stole our Christmas rally.

Fiscal Cliff negotiations are acting as a catalyst for market volatility; a great deal is at risk.  Consequently, GWM Model Portfolios are largely in cash at the moment.

This chart provided by Stocks to Go shows just how news-driven this market is.

The Bears are gaining ground.

Volatility Spikes

(The Woody Indicator)

The level of fear in the market spiked up sharply on Thursday.

Happy Holidays from Gerritz Wealth Management

Fiscal Cliff Tax Inplications

According to the Tax Policy Center, if we go over the Fiscal Cliff here's how the tax increases would affect households at different income levels:

Annual income: $20,000 to $30,000.

Average tax increase: $1,064.

Annual income: $40,000 to $50,000.

Average tax increase: $1,729.

Annual income: $50,000 to $75,000.

Average tax increase: $2,399.

Annual income: $75,000 to $100,000.

Average tax increase: $3,688.

Annual income: $100,000 to $200,000.

Average tax increase: $6,662.

Annual income: $200,000 to $500,000.

Average tax increase: $14,643.

Annual income: $500,000 to $1 million.

Average tax increase: $38,969.

Annual income: More than $1 million.

Average tax increase: $254,637.

Market Drops as Fiscal Cliff Progress Hits a Wall

The outlook on the fiscal cliff took a turn for the worst as House Republicans failed to vote on Speaker John Boehner's  Plan B for the budget. This took the market by surprise: the knee-jerk reaction was to sell. The reality is that President Obama was going to veto it anyway.

The market technically remains in an uptrend. However, that could change if we don't get a resolution soon. 

It seems that the President and the Democrats are content to go over the Fiscal Cliff. By going over the cliff they would get the tax increases they want on the so called millionaires and billionaires by letting the Bush tax cuts expire. Then in January they would possibly introduce legislation to reduce taxes on middle class tax payers. 

I think it ultimately would be political suicide for our elected officials to drive us into a Washington created recession.  I am sure there will be a resolution, but one by the end of the year now seems much less likely. In the mean time we will probably suffer through some wild swings in market.

Market Comment 12/18/2012

Optimism about a resolution to the fiscal cliff spawned a strong rally the last couple days.  It would be a very good sign if the market digests these gains without faltering in the coming days.

The market is now a little overbought.

Market Direction Model

More Impulse Indicators fired. This is bullish.

S&P 500

Chart View

It has been a tough few months. This week's impressive
comeback is heartening.

GWM New America Folio Position Low Down: NeuStar (NSR)

Telecom services provider NeuStar (NSR) has now rallied for five of the past six weeks blowing past its $41.41 buy point. NeuStar has posted 11 straight quarters of double-digit earnings growth, with the last three showing acceleration. Sales have grown by double digits in 10 of the past 12 quarters.

After a few nail-biter days, we got an upside boost today, with some of our Impulse Indicator firing. Perceived progress on the Fiscal Cliff negotiations fueled today's rally.

Improving

Market Direction Model

We had a few Upside Impulse Indicators fire today. This is good!