Market Timing – Weekly Stock Market Strategy – October 2011

Posted: November 29th, 2011 | Author: | Filed under: Uncategorized | Tags: , , , , , , , , , , , , , , , , , , , | No Comments »

Weekly stock market strategy updates that went out to subscribers during October 2011. To receive current weekly update sent to your email, click on the FREE TRIAL link at the top of the page.

Weekly Market Update 10/2/11

Here is something new, economic reports that are not that bad. Year over year durable goods orders are up 12.3%. GDP came in slightly above consensus at a positive 1.3%. That one truly shocked me. Jobless claims came in under 400k and, it was the lowest reading since April. Chicago PMI beat the consensus range with a solid 60.4 the best reading in two months. Consumer Sentiment also beat the consensus range with a 59.4. It was nice to see some numbers beat consensus but, I am still concerned we have not seen the lows yet. The big number this week will be the Employment Situation on Friday.

The market has been range bound for almost two months now. For this type of market the swings have been rather violent in both directions. As soon as the market makes a rather impressive move in one direction and you start to believe this move might be for real, the market reverses and moves violently in the other direction. This tells me nobody is sure which direction this market will ultimately go. I think it also means whichever direction the market decides to go, could be a significant move. I still feel the next move will be lower. The only thing that could possibly change that is a huge European bank bailout that the market can believe. Judging by the baby steps they have taken in Europe so far, I would say the possibility of this is slim.

Weekly Market Update 10/9/11

Quarterly ETF Portfolio 25% of entire portfolio.

25% Large Cap International (EFA) @ 58.51 Closed Friday @ 48.98
25% Large Cap International Value (EFV) @ 50.40 Closed Friday @ 42.56
25% Europe (IEV) @ 40.21 Closed Friday @ 32.96
25% International Small/Mid Cap Growth (IFSM) @ 38.69 Closed Friday @ 31.07

The Quarterly ETF Portfolio lost a little over 17% this quarter. If you kept this to less than 25% of your total portfolio this would have resulted in a loss of approximately 4.5% to your total portfolio. This is why I diversify across different trading strategies. I am so disappointed with the performance of the Quarterly ETF Portfolio, I am thinking of adding a market signal that would get us out in case of a severe bear market. It just so happens our entry date for the 3rd quarter was only a couple days from the high of the quarter, and our exit was only four days from the low of the quarter.

If we had used the Intermediate Term Market call to exit on August 8th or losses in the Quarterly ETF portfolio would have been reduced about 25%.

All sectors showed negative returns for the 3rd quarter. 25% of the overall portfolio will remain in cash this quarter.
Most of the economic reports this week were in the consensus range. Construction spending did manage to beat consensus. Jobless Claims came in back over 400k again. Fridays Employment Situation kept the unemployment rate unchanged at 9.1% while adding 103k jobs. It turns out 45k of those jobs were Verizon workers returning from strike.

Did we finally get a retest of the August lows this week? Tuesday we opened below the lows made in early August. Some financial prognosticators feel we just needed a retest of the August lows before starting a rally to finish the year. Others are still concerned about European debt crisis and the economy in general. I think I fall into the latter camp. I find it hard to believe we could have put in a significant low with no concrete resolution to the European debt crisis. Ultimately the market will decide and what I have to say will have no impact on which direction the market decides to go.

Weekly Market Update 10/16/11

The economic news the last few weeks could be summed up as “less bad”. The sole exception to that is Jobless Claims number, which is stubbornly staying over 400k most weeks. Retail Sales came in a little better than consensus. The retail sales number and the “less bad” numbers have come as somewhat of a surprise to me. We had some really bad Consumer Sentiment numbers several weeks ago. That along with persistently bad Jobless Claims numbers led many highly respected economists and myself to believe we were headed for another downturn in the economy. This week we have a few inflation numbers coming out. The sell off in the 3rd quarter included many commodities. So I would be surprised if the month over month inflation numbers shows any troubling signs of inflation.

Wow! What a week for the markets. The SPY was up almost 6% this past week causing my short-term indicator to turn bullish. The market has continued to move higher despite being overbought all week. That tends to be bullish on a long-term basis. The best 6 months with MACD strategy, as popularized by Sy Harding and The Stock Traders Almanac, is giving a buy signal. The stock/bond ratio signal I follow could give a buy signal next week. The market is extremely overbought and near resistance. I will need to see at least a two-day pullback before I buy the SPY. Watch for a mid-week update, as I will send one out when decide to enter a position. I am getting some bullish signals but I want to be extremely cautious getting back in.

What has happened this past week? As I stated last week I am bit perplexed by this market rally. We have not seen any real resolution to the European debt crisis. Any resolution is likely to be too small or highly inflationary. Maybe the market is expecting the highly inflationary scenario. Or, is it possible the European central bank has given the banks some inside information and encouraged them to buy in mass ahead of the actual release of the bailout plan in an effort to improve bank balance sheets with some proprietary trading profits. I don’t know call me highly suspicious at this point. I feel like I am trying to make calls in a rigged market. The long-term trends are still tradable but the high frequency trading and market manipulations of the central bankers can make short term trading a risky proposition.

Weekly Market Update 10/23/11

I would say the economic numbers this week continued the “less bad” trend. Manufacturing numbers from different regions were not consistent. Most of the inflation numbers came inline with consensus estimates, although some were troublingly high. The PPI came in at 7% over the past year and was higher than last months. Jobless Claims again came in over 400k.

We did not get the pullback I was looking for and I am left on the sidelines as the market continues higher. I continue to struggle to understand the sudden change in direction the market has made. Yes there are some compelling bullish reasons. Stock valuations were starting to look attractive. Sentiment was bad but not so bad it looked bullish to me. Earnings season actually started after the rally but it has been pretty good so far. On the bear side we saw the European debt crisis drive the markets down in August. We have yet to see a resolution to this as a deadline draws closer and closer.

Looking at the charts this weekend I noticed that we are again in a period where the stock market and the US Dollar are closely related. In fact over the last 20 days there has been an almost perfect inverse correlation between the two. The dollar has been falling and stock market has been rallying. These two markets do not always trade in this manner. In fact the sell off in equities started before a rally in the dollar. The recent rally in stock market started at almost exactly the same time as a sell off in the dollar. The dollar is approaching some important support levels. We are likely to see a pullback in the equities market some time in the next few weeks. Hopefully my patience will be rewarded and I will able to get into the SPY below 123. That was Mondays opening price for the SPY and the approximate entry price had I just entered Monday morning after a few of my signals had turned bullish.

Weekly Market Update 10/30/11

This weeks economic numbers were mixed. Some beat consensus and some came in below consensus. New Home Sales and Consumer Sentiment beat consensus. Consumer Confidence and Pending Homes sales came in below consensus with Pending Homes Sales falling 4.6%. Jobless Claims came in at 402k. Durable Goods excluding transportation rose 1.7%.

The market jumped higher Thursday on what appears to be a resolution to the European dept crisis. First I was surprised to see an agreed upon resolution. Secondly I was somewhat surprised not to see a buy the rumor sell the fact sell off. If the markets had been rallying on a proposed resolution to the debt crisis, a sell off seemed in order. The markets started the month oversold and spent most of the last few weeks in overbought territory. There have not been two consecutive down days all month. If there had been I might have a position on. Instead I have missed out on a rally that is 18% percent above the lows. I am still looking for a safe place to get long. A two to three day pullback would be a nice place to start. As I have stated the decline in the US dollar is a big part of the rally in equities. I would be surprised if the debt resolution didn’t put a halt to the rally the Euro has seen. This should cause a rally in the dollar and a pullback in equities.