Daily Market Snapshot 05 30 2012

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Daily Market Snapshot

The market is deteriorating again

Chart View

S&P 1500

This type of pattern formation (bear flag) can
be viewed as a continuation pattern, meaning more downside to come.

Market Direction Model

The market can not sustain a rally.

The Woody Indicator

(Volatility Indicator $VIX)

Back in the Danger Zone

The market is deteriorating. I will substantially reduce risk in all GWM Model Portfolios Thursday morning. Each bounce attempt has been very short lived. The news out of Europe and continued reports that point to slowing economic activity worldwide are definitely constraining this market. I think we need to ride this out in the safety of high quality bonds and defensive positions only.

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.

Daily Market Snapshot 05 29 2012

 Daily Market Snapshot

Red is bad and Green is good

 

Market Direction Model

The absence of  blue impulse indicators on the left side of the MDM
show that today's up move was not as strong as it appeared to be.
Caution is still called for.

Trendline Analysis

S&P 1500 Composite Index

The European recession/depression and debt crisis is likely to be the tail that continues wags the dog until the Greek elections on June 17th. Until that time we can only speculate on the future of the Euro. For now the Euro is dropping like a rock as the US Dollar continues to strengthen. This has been the reason for the dramatic drop in all commodity prices recently.




Addendum:   European Youth Unemploymnet Rate

European Youth Unemployment Skyrockets

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.

Daily Market Snapshot 05 25 2012

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Daily Market Snapshot

The Daily Market Snapshot illustrates the condition of the market,
 as measured by the S&P 1500 Index stocks, for just a single day.

We had a down day today as the bears gained the upper hand.

Market Direction Model

The Market Direction Model (MDM) illustrates the market condition
as it evolves over consecutive market days.

Green = Bullish
Yellow = Nuetral
Red = Bearish

All U.S. markets improved for the week starting 05 21 12.

Trendline Analysis

S&P 1500 Composite Index

The Woody Indicator

 (Volatility Indicator $VIX)

The Woody Indicator gives us a read on mood of the market.
It measures and magnifies investor emotions,
fear and greed, as well as volatility.

While volatility has come down somewhat, fear remains at a high level.

The Woody Indicator is still in the Danger Zone.

Have an enjoyable Memorial Day Weekend.


Stephen


ps: I am now back in Medford.

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.

Facebook IPO Disappoints

On Friday Facebook (FB) had its initial public offering (IPO). It opened up at $38 per share. It traded up to over $45 per share then slid throughout the day, finally closing at just $38.23. After all the hype, this was really a less than glowing outcome. Throughout the day the $38 level was not breached. Late in the session, the share price rapidly vacillated back and forth between $38 and $38.01 for a very long period of time. The selling syndicate was compelled to not let the price drop below its initial offering price in the secondary market; they succeeded in that effort. They had to continually buy back shares to support that $38 price. They were probably relieved when the market finally closed and their bleeding stopped.

The ability of the large institutions to control stock prices in the secondary market was clearly demonstrated with the Facebook IPO. This is the exact reason that I try my best determine what direction the large player institutions are trying to push a stock or the market.

I am sure that the current negative sentiment in the market in general had a large impact on the Facebook offering. But, I also think that both the general public and investors as a whole are much savvier than in the past and are less willing to blindly jump on the hype bandwagon. There is no doubt that Facebook has had an amazing impact on world. I will be watching closely to see how it trades in the next few weeks. Longer term it very well may make investors wealthier. For now it has just made Facebook employees and FB's venture capitalist wealthier.

Stephen


Addendum: Why FB would not fall below $38 on opening day

Massive bids from the selling syndicate at $38 provided a
rock solid line of support for FB shares in the after market.
They did not want to suffer a black eye from shares selling below
the offering price on the first day.

Market Condition = Oversold

Daily Market Snapshot

S&P 1500

Market is now Oversold

 

S&P 1500 Index

Chart View





 

After yesterday's big sell-off the broad market, as represented by the S&P 1500, is now down over 8% from it's recent highs. The S&P 1500 Index is now within a few points of wiping out all of it's 2012 returns.

 

Based the current market snapshot the market is oversold and due for a bounce. Today, Facebook is having it's initial public offering, the most anticipated IPO in history. Futures are indicating that we will indeed get a market bouncer this morning. The nature of this bounce will be very telling. If the bounce is strong and holds thoughout the day there may be some hope that the correction has run it's course.

 

Ian Woodward, market analyst and HGS Investors forum mentor, in his usual colorful language, says we are at Custer's Last Stand. We either get a meaningful bounce that represents institutional sponsorship across many sectors or the floodgates open up and the market sinks further.

 

All GWM Model Portfolios currently have little if any exposure to  the equity market. In other words, we are safe.

The Woody Indicator

 (Volatility Indicator $VIX)

Volatility has increased as the market has corrected.

I want to remind you that this is not the end of the world or the stock market. It is a market correction. We will  want to re-engage when volatility subsides and our indicators give us the all clear signal.  In the mean time we keep our powder dry.


Addendum: Flexible Income Folio

Our investment management methodology and investment selection process is all about comparing the relative strength of the universe of investment  alternatives. Simply put, we want to be invested in those assets that are showing strength while avoiding those assets that are showing weakness.

Below is a chart that depicts the performance of various investments that I take positions in from time to time in our Flex Income folio. BOND (blue line) and IEF (baby blue line) have clearly outperformed the rest.

We avoid the rest and invest in the best.

Trendline Analysis

Flex Income Folio candidates

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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.

What's Working?

Market Weakness Prevails

Canary in a Coal Mine

Apple, Inc.

Apple is our go-to canary in a coal mine.

So Goes Apple - So Goes the Market

Trendline Analysis

Trendline Analysis

NASDAQ

Just like Apple, the stock market in general continues lower.

Addendum: Inflation Hedges Folio

Natural Gas

Commodities have slid as the Euro currency has dropped and the US Dollar has risen. This should
continue until there is some resolution to the Greek / Euro Zone delema. The following is our Market Direction Model applied to assorted hard assets that we use to monitor inflationary pressures.

Note that Natural Gas is actually rallying.



Natural Gas has fallen to such a low level that it is now a compelling buy and
is in fact being bought as a true value play.

Trendline Analysis

Natural Gas (UNG)



I added to our existing position in the natural gas ETF (UNG). These low prices are indeed compelling.

Addendum 2 - Long/Short Folio:

I overweighted our holdings in Pimco Total Return ETF (BOND) . So, BOND is now held both in the Flex Income Folio and the Long/Short Folio.

Our stance on the market in general remains very defensive. I am comfortable with overweighting BOND and UNG as both are attracting money right now.

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.

Daily Market Snapshot 05 14 2012

Daily Market Snapshot         

The Bears overwhelmed the Bulls

The Daily Market Snapshot and the the Market Direction Model clearly illustrate the condition of the market. We are in the midst of a market correction.

Market Direction Model



Market in Correction



Trendline Analysis

Nasdaq Composite Analysis

The 2900 support level in the Nasdaq Composite has held to this point.

The Nasdaq Composite is now down more the 7% from its March high. We are due for a bounce, however, I think that the 2900 support level could be broken soon due to the market's current focus on headline news out of Europe. If the 2900 support line does not hold we should expect a further move lower.

We continue to maintain a very defensive posture in all GWM Model Portfolios.


Flexible Income Folio Highlight:

Flexible Income Folio

Featured Holding

Pimco Total Return ETF (BOND)

The Pimco Total Return ETF (BOND) has performed very well since it's March 1st inception. It is 300 basis points ahead of the original Pimco Total Return mutual fund (the world's largest fund).

From Investment News:

"Since the Pimco Total Return ETF (BOND) was launched on March 1, it has had a return of 4.14%, while the mutual fund version has had a return of 1.17%. The Barclays Aggregate Bond Index, the traditional benchmark for intermediate-term bond funds, has returned 0.03% over the same time period."

"The secret to the ETF's success is simple. At a little over $800 million, the ETF is free to invest in Mr. Gross' best ideas — and only those — while the mutual fund, with $258 billion in assets, is forced to invest more broadly."

“It's a high-conviction portfolio,” said Scott Burns, director of ETF research at Morningstar Inc."

Trendline Analysis

Pimco Total Return

PIMCO TOTAL RETURN (ETF symbol = BOND)

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.