Weekly Market Update 10/3/10

Remember the “Flash Crash” of May 6 that thankfully we were not fully exposed to. Well a report has been released that claims to have found the cause. Apparently someone placed a rather large sale in one of the stock futures markets. What the report didn’t go into is why certain stocks seem to have had such bogus bids prior to this large futures trade. And why did some ETF’s trade for only pennies during the flash crash. This report also went on to sing the praises of High Frequency Trading or HFT. Most of the time I am believer in the free markets but these HFT do not seem to have any positive social or economic purpose. I would go as far as to say that these HFT are slowly eating away at Main Street confidence in the markets. I should have known that when this report defended HFT that the whole report was to be taken with a grain of salt.

Another story is starting to break and I think it could have a material impact on financial stocks at some point. It appears that some banks during the foreclosure process are going as far as forging documents to take the homes back. It is so prevalent that some title companies are not insuring the title of homes foreclosed by some banks. In other word these foreclosed home will have a clouded title, and ultimately be worth less. In another aspect of the financial meltdown it turns out that some of the mortgage-backed securities sold by Wall Street firms were not of the quality that the prospectus called for. In one particular instance apparently 97% of the mortgages obtained through Countrywide were not of the “quality” outlined in the related prospectus. Fraud on a massive scale was apparently behind the financial meltdown and the banks are committing fraud to recover some of there assets. This fraud has resulted in the decline in value of just about everyone in America’s home. Does this qualify for class action status?

Next week Barron’s should have their Quarterly Mutual fund report out and I will be making our recommendations for that portfolio. In addition I will be adding another aspect to the portfolio, which will also be updated quarterly. I will be recommending one currency to hold, in ETF form, as a small portion of your portfolio. The Fed Reserve is trying to inflate this economy out of the mess it is in, and debasing our currency in the process.

The Indexes we track were off less than a fraction of a percent this week. The SPY has not seen a lot of follow thru since its breakout a few weeks ago. I will be extremely surprised if the unemployment numbers that come out Friday do not have a positive effect on the market. Most of the economic number released in the past month have not had a negative impact on the market despite the fact that after dissecting the full reports the economy does not seem to have any real legs.

Weekly Market Update 10/10/10

The reaction to Friday’s unemployment number was close to what I expected. I personally thought the numbers were pretty shitty but the market just refused to sell off. But somehow I was amazed listening to explanations for Friday’s move. “The private sector added 64,000 jobs.” “The market is reading that the Fed is going to have to do more easing.” Which is it good that private sector is adding jobs or so bad the Fed will have to do more easing? I am sorry but I am of the belief that the Fed is just about out of bullets. The only thing they have left in their arsenal are WMD’s (Weapons of Mass Destruction) that will ultimately lead to rapid inflation. Are we starting to see signs of inflation? Maybe, several of the grain futures were lock limit up on Friday. The million-dollar question is, “Are we headed for stagflation or looking to create the next asset bubble?” As I see it, the only plausible explanation for the gravity defying behavior of the markets (short of conspiracy theories), is the expected outcome of the mid-term elections.

It is time to take our positions for the Quarterly ETF Strategy. I have provided a link below if you are new or would like to review the strategy. The ETF’s recommended for this quarter are listed above. It is recommend that this only be 25% of your total portfolio. As an example for a $100,000 portfolio, $6,250 would be used to purchase each of the four ETF’s listed for a total investment of $25,000 in the Quarterly ETF Strategy. I will be making my purchases Monday near the open. I had mentioned last week I wanted to add a currency ETF as part of the Quarterly ETF Strategy. After closer review I cannot, in good conscious, recommend any of the ETF’s I was considering to counter a falling US Dollar. The ETF’s I am watching are just to overbought at this time.

Link to Post on Quarterly ETF Strategy:
“>http://www.buyandholdisdead.com/public_html/wordpress/193/quarterly-etf-strategy/

Weekly Market Update 10/17/10

When trading, rarely does an error go in your favor. However, getting the email out a day late actually got you better fills on the Quarterly ETF Strategy. Again I apologize for the error. I have listed above the Tuesday morning opening prices for the recommended ETF’s. I am moving the stop on the SPY position to 110.20.

We are also right at a signal date for the Best 6 month with MACD strategy. If we were to take this now we would be 75% exposed to the market. I am very uncomfortable adding to our existing position at these levels. The markets were rather quiet this week so I do not have much else to report.

Weekly Market Update 10/24/10

It was another relatively quiet week for the markets. The only certainty lately appears to be the markets reaction to Permanent Open Market Operations, or POMO, by the Fed. The market seems to be up rather consistently when these POMO actions take place. They have been taking place rather regularly lately, and at this point are schedule until November 8. My gut is telling me to look for a correction after the election. That whole buy the rumor sell the fact thing. The market has been going up probably in anticipation of the outcome of the coming election, and I think once the official results come in the market will probably see at least a minor correction. This would give us a good opportunity to add to our long positions. Until then we will watch and wait.

Weekly Market Update 10/31/10

TD Ameritrade announced 4th quarter profits this week and profits
fell by 27% on the lowest trading in two years. Which leads me to the
quote of the week, from Tyler Durden at ZeroHedge, “the only ones
left trading the market are the Fed and the PDs (Primary Dealers),
passing hot potatoes to each other, and the HFTs (High Frequency
Trading), churning the shit out of everything else to pretend someone
is still trading.” Well at least I am not the only one that finds the
current market to be highly unusual.

This coming week could be very interesting. In addition to the
elections on Tuesday, the Fed will announce how much money they will
print for QE2. Friday is the release of the unemployment numbers for
October. As you can see there are several opportunities for a big
move this week. Due to the potential for increased volatility this
week, I will be moving our stop to 115.30 for the SPY. I have no exit
for the Quarterly ETF portfolio at this point.

Weekly Market Update 4/4/10

Most of the markets finished up just shy of 1% for the week. Not
much else has changed. I think the upside from her is limited and
risk of entry from this point is to great.

Weekly Market Update 4/11/10

The markets have continued to rise and more sentiment indicators are
reaching extremes. Long entries at this point carry additional risk.
That being said, Barron’s Quarterly mutual fund report is out this
week. So, if you plan on following the Quarterly ETF Strategy, Monday
will be the day to place your trades. Based on the system I sent to
you in the Quarterly ETF Strategy email here is the allocations for
this quarter:

Quarterly ETF Strategy Allocation

25% IJT-iShares S&P Small Cap 600 Growth
25% IJS-iShares S&P Small Cap 600 Value
25%. EWJ-iShares MSCI Japan Index
25% SCZ-iShares MSCI EAFE Small Cap

I am allocating 25% of my total portfolio to this strategy so I will
be putting 1/16 of my total portfolio into each of the four ETF’s
listed above. By the way, as of Fridays close, this strategy was up
5.11% for the first quarter.

Weekly Market Update 4/18/10

The markets finally took a 1% hit on Friday when the SEC brought
fraud charges against Goldman Sachs. I would like to see some of the
Wall Street firms pay for bringing our economy to the brink of
financial disaster. Usually when they make a mistake the damage is
limited. This time they almost brought down the entire system. That
being said it doesn’t sound like the SEC has much of a case.
Brokerage houses quite frequently act as the middleman, and that
seems to be what they were doing this time. The timing of the
charges is quite suspect. Bank of America and Chase both reported
quarterly profits over $3 billion, while the senate is getting ready
to vote on a Financial Reform bill. I think this bill is virtually
guaranteed to pass. Even though all the republicans are apposed to
it, I don’t think this is the hot button topic that Health Care was,
and most Americans are probably not apposed to it.

From a technical perspective this could be the catalyst for at least
a minor retracement in the markets. The markets have been overbought
from both a technical and sentiment perspective for the past few
weeks. It is possible that the profit taking could continue this
week.

Weekly Market Update 4/25/10

Well the Goldman Sachs charges do not appear to be the catalyst I
was hoping they might be. The market shrugged of the news and
performed strongly this week and nothing much else has changed.
Market sentiment is still extremely bullish. The small cap portion
of the quarterly ETF portfolio was up over 4% this week.

Weekly Market Update 3/7/10

It was a very good week for the markets. The SPY broke through 111.60
on Monday, and finished the week within 1% of the highs for 2010. As
I said last week once 111.60 was taken out the next logical target
would be the highs made in January. I was surprised the move came as
quickly as it did. It pains me to be on the sideline during a week
like this. I think the upside this week is probably limited. The SPY
is extremely overbought. The VIX has reached a level that has not
been seen since May 2008, shortly before the market peaked. The rally
this week came on lower than average volume. I think the rally this
past week was more likely desperate short covering than aggressive
new buyers.

Weekly Market Update 3/14/10

Another good week for the markets and I am on the sidelines. I got a
buy signal on March 4th. Unfortunately I had gotten used to being
able to get in on a retracement after this particular signal is given.
We have yet to see that retracement. My bad and I am sorry we have
missed this move.

This does bring up a good point regarding diversification. It is
never a good idea to have all your eggs in one basket. We usually
think of diversification in terms of having multiple stocks instead
of just a few. This is why I trade ETF’s like the SPY. It can quickly
become a daunting task trying to keep up with enough stocks to get a
fair amount of diversification. However there is another form of
diversification I want to discuss with you and, that is system
diversification. The SPY system I follow did an excellent job of
being out of the markets when things got ugly. But it is one system
and no one system is right 100% of the time. That is why I think it
is best to diversify with multiple systems that have worked well over
time and are not overly optimized.

I have finished the research on a quarterly ETF system that over the
last 10 years would have doubled your money. I will be adding this at
the end of the quarter for some added diversification.

Not much to say on the markets this week. Unfortunately, I cannot in
good conscience recommend buying the market when it is this overbought.
I will be waiting for something to upset this trend. If congress
manages some resolution on health care reform, that could be the
trigger. I will keep you posted.

Weekly Market Update 3/21/10

Well the market finally ended, on a daily basis, its streak of
consecutive up closes. It was a very impressive run. Bullish market
sentiment has reached a level that should limit any advance from
here. The market should be sideways or down over the next few weeks.
If we get a pullback it could give us a buy setup.

The potential market reaction from any health care reform passed is
the real wild card here. Typically the market seems to know all that
is knowable. The exception would be natural and man-made disasters.
The “buy the rumor sell the fact” saying is what keeps coming to
mind. What I mean is the market has rallied to this point. I think
any sense of finality in regards to the healthcare reform, could be
a turning point.

Weekly Market Update 3/28/10

Well the market continued its climb this week. Not even major
healthcare legislation could stop it. Well if I had not been out of
the market yet I would now be looking for an exit. Momentum has
definitely slowed and we are starting to see technical indicators
set up for a sell signal. The MACD has turned negative for the first
time since February 16th. The RSI indicator is showing a bearish
divergence. More and more sentiment indicators are reaching bullish
extremes. I know last week I said the market should be sideways to
down over the coming weeks. Going into this past week I would have
given the market no more than 2% on the upside. I would be very
surprised if the market is up over 1% at any point this coming week,
and I think we will see negative returns for the week.