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.

Weekly Market Update 09/05/11

The big economic number this past week was the employment situation. The private sector added zero jobs in July. This economy is a long way from being in recovery. There are no big economic numbers in this holiday-abbreviated week. We will see if jobless claims can show a sub 400k print. That has happened only once in the last 20 something weeks.

Last week I mentioned a bear flag formation and was hoping to see some closes over 120. We did manage to get 4 closes over 120 before closing out the week at 117.85. I don’t think the bear flag formation can be dismissed yet. The shape of the flag is different but still there. We will start the week in a short-term oversold position. If the market is truly trying to shake of its bear legs we will need to see a change in the short-term direction by Wednesday. Another possibility is the market may still need to get a closer test of the early August lows. If the SPY manages more than two closes under 110, look out below.

Weekly Market Update 09/10/11

There were not many economic reports this past week. The only one worth commenting on is the Jobless Claims. Jobless Claims again came in over 400k.
In fact the 4-week moving average of claims is now over 414k and has been rising the last four weeks. This coming week has a lot more economic releases. The more significant releases will be PPI and Retail Sales on Wednesday. Thursday is CPI and the Philadelphia Fed Survey. The Fed Survey saw a huge drop last month. It will be interesting to see if that trend continues. On Friday we have Consumer Sentiment. This number also saw a rather large drop last month.

Technically the bearish flag formation I mentioned a few weeks ago is still forming and is still a real possibility. So much so that I am concerned a close below 112 on the SPY would more likely mean the beginning of a new down leg. Previously I had left open the possibility of a closer test of the early August lows. International stocks heavily represent our Quarterly ETF Portfolio, and three of the four ETF’s have taken out there August lows. The Quarterly ETF Portfolio has been the weakest link in our overall portfolio. Unfortunately the strategy calls for us to keep the positions until the end of the quarter. I will ride these positions until the end of the quarter. I would not blame you if you decided to exit these positions now. They are substantially under water and are not likely to get close to even before the first week in October.

Weekly Market Update 09/18/11

A quick summary of all the economic reports this past week. Year over year the Producer Price Index is up 6.5% and less food and energy PPI is up 2.5%. Year over year Consumer Price Index is up 3.8% and less food and fuel up 2.0%. Retail Sales have now been flat for the past two months. Both the Philadelphia Fed Survey and Empire State Manufacturing index concur that business is contracting in that region. Last but not least jobless claims came in at 428k. The 4-week average is 9k higher than it was a month ago. Consumer Sentiment stabilized after last months plunge. Overall, nothing positive came of this weeks reports.

Stocks finished the week with the second best weekly performance in a year. I am asking myself, “Is the “risk on” trade back in play?” I am reading not widely published reports that a European bank bailout will be US dollar denominated. Which really means the Fed will print more dollars to bailout Europe. I am not sure why this is not getting more coverage. If it is true it could explain the move back into some riskier assets such as stocks. Technically the move this week did nothing to negate the negative outlook we have discussed the past few weeks. The market is currently short term overbought and near the top of the recent range.

Weekly Market Update 09/25/11

Last weeks economic releases had a couple points of interest. Existing home sales were up 18.6% on year over year basis. This is about as good as news has gotten lately. However we are a long, long way from a healthy housing market. Jobless claims came in at 423k and revised the prior weeks number from 428k to 432k. The Fed announced “Operation Twist” to target longer term yields. This may not have been the QE3 that the market was hoping for. That along with more bad news out of Europe was enough to reverse last week’s nice gains. The number I am interested in seeing this week is GDP. I suspect this number will come in below consensus of 1.2% and I think there is a real possibility this number misses badly.

As I stated last week, the markets positive performance did nothing to negate the bearish outlook for the market. This week the market took back everything it gave the previous week and then some. Unless there is some real resolution to the issues that plague Europe and, I don’t mean another bandage when an amputation is required, we could see a continuation of the sell off. The only possible positive outcome I can see is that maybe we are just retesting the August lows. I think this is a slim possibility at best. I think the Fed said it best this week when they said there is “significant downside risk.”

Weekly Market Update 07/03/11

What a difference a week makes. So much for a pause before another leg down, the markets took off this week and didn’t look back. I needed to see a weekly close over 130 on SPY to signal a long position. We got that and then some with SPY closing at 133.92. The move was enough to take our intermediate term market call back to bullish.

What I keep asking myself is, “What changed this week?” Greece was able to kick their problems down the road. I don’t think we have completely avoided a Greek default. QE2 has officially ended, so what will happen to interest rates now? So there is a lot of potential bad news out there. I am still cautious. I will be looking to buy the SPY on a healthy pullback.

Weekly Market Update 07/10/11

The Employment Situation report was released on Friday and it was not pretty. Anyone who reads this newsletter would not have been surprised by the up-tick in the unemployment rate. Every week we see over 400k new unemployment claims and the previous weeks claims are consistently revised higher. When the prior weeks numbers start getting revised lower we may actually be making some progress on the employment front.

I have yet to see to see the pullback I am looking for. The more I look at this market the more I worry about where we go from here. The last week of June is looking more like a short covering rally than the beginning of a new leg up. That price action caused two trading models to turn bullish. The RSI system and the Stock/Bond model are two systems I have a great deal of faith in both turned bullish. I do not like that I am trying to second-guess these two fine systems. On the other hand occasionally systems get whipsawed or give a bad signal before turning back in the prior direction. What I will probably do is recommend a relatively tight stop if I see a pullback that would allow a good entry point.

Weekly Market Update 07/17/11

We saw a pullback most of the week. Friday’s price action was the first of the week that closed closer to the high of the day than the low. I am recommending a purchase of the SPY if in the final hour of trading Monday (after 1pm pacific) the SPY is trading over 132. I will be honest this is a difficult trade to recommend. I have concerns about where the market will be in 6 months. As I have said in the past I try my best to stick to my systems and not trade on my gut feelings. I will be recommending an exit on the first close below 130. That should keep the risk to a relative minimum. I will be placing 25% of my portfolio in this trade.

On the economic front, despite a holiday-shortened week, jobless claims still came in over 400k. Retail Sales were flat for June. There was not much else that came out in the form of economic reports this past week. This coming week news will probably focus on the negotiations over the debt ceiling. The European Banking Authority released the results of a stress test design to check the health of 91 European banks. Several banks in Spain failed the test. I am not sure the full ramifications of the stress test were felt on Friday. In my opinion one thing going in favor of the U.S. equities markets is the problems in Europe. Which currency is in worse shape? I am not sure anyone truly knows the answer.

Weekly Market Update 07/25/11

Well we missed an opportunity to get long the SPY at 132. Monday did not rally to close over 132. Tuesday gapped higher and closed near 133. I did not feel like chasing the trade after Tuesday’s close. I will sit back and watch the price action this week. If I see something interesting I will send out a mid-week update.

The jobless rate rose in 28 states last month. This is definitely not a sign of recovery. Jobless claims came in over 400k again this week with the prior weeks number once again adjusted higher. There is a lot of negative press regarding the debt ceiling negotiations. With all the dire predictions regarding a default you would think I would be a little more pessimistic. I am not. Even though this is important, I see it as a non-event for the stock market. I do not see it playing out like the dooms day reports coming from the press. There is a lot to be negative about in this market but not the debt ceiling negotiations.

Weekly Market Update 07/31/11

I could not have been more wrong when I said I thought the debt ceiling negotiations would be a non-event for the stock market. Our politicians on both sides of the isle have managed to make this a real event for the stock market. And the kicker is now we are almost guaranteed a mediocre piece of legislation that will do little more than raise the debt ceiling. This could likely trigger the downgrades on U.S. debt obligations from the ratings agencies. The question then becomes how big of an effect a ratings downgrade has on the stock market. I don’t know but we can be pretty sure that the long-term outlook for the dollar will be negative since the fed will continue to try and inflate our way out of debt. This should be good for gold bad for the dollar. The stock market could be driven either by fed policy or economic news.

A couple of economic numbers this past week were notable.
Durable goods orders were expected to be plus 1.0%, they came in at minus 2.1%. Jobless claims came in under 400k at 398k for the first time in recent memory, although last week numbers were once again revised higher. GDP was the big shocker, 1st quarter GDP was revised down from 1.9% to 0.4%.

There may be a bit of a bounce when congress increases the debt ceiling but beyond that I am in a wait and see mode.

Weekly Market Update 6/5/11

Below is a list of last week’s economic releases and how the actual numbers compared to the consensus forecast. Three-fourths of the numbers came in worse than expected. This might have a litlle to do with why the averages were off over 2% this week.

Tuesday –
Chicago PMI – Below Consensus
Consumer Confidence – Below Consensus
Wednesday –
ISM Mfg – Below Consensus
Construction Spending- In Consensus Range
Thursday –
Jobless Claims – Above Consensus (bad)
Productivity and Costs – In Range
Factory Orders – Below Consensus
Friday –
Employment Situation – Below Consensus
ISM Non-Mfg – In Range

This week will be quiet in terms of economic releases.

The markets have reached a support level that should be good for at least a small bounce. If 130 on the SPY cannot hold we are in store for a bigger correction. A waterfall sell-off could be a real possibility if the SPY closes below 130 and that is not far from Friday’s close of 130.42. Friday’s price action was enough to change the intermediate term market call back to bearish. This signal has been whipsawed some lately. I am not ready to give up on this indicator anytime soon since it kept me out of the market for most of 2008.

Weekly Market Update 6/12/11

Well so much for a bounce at 130 on the SPY. The SPY is now off almost 7% from the highs set the first part of May. The only good news is that sentiment has gotten pretty bad. The contrarian in me is starting to keep an eye out for a possible bottom. As I stated a few weeks ago, as soon as things look bad enough for the Fed to justify QE3, we should start to rebound.

There are quite a few more economic releases this week. The market could get volatile this week. The sell-off was fairly significant this past week with very few economic reports.

Technically speaking 127 could act as support. If that level is breached 125 would be the next likely target.

I am taking a family vacation this week so I will not be sending out a Weekly Market Update. However if the market dictates I may send out a Mid-Week Update if necessary.

Weekly Market Update 6/26/11

The SPY has not been able to close higher than previous days high for two consecutive days since the end of May. The market has seen some back and forth over the last two weeks trading between approximately 126 and 130. Is the market trying to form a base or catching its breath before the next leg down. I think the later is the more likely scenario. The only thing the market has going for it right now is market sentiment is so bad it’s bullish. That however is not enough for me to jump back in. I need to see it in the price action and we have not seen it yet. A weekly close above the high of the previous week would be a good start. The announcement of QE3 might be another scenario for getting back in. I do not trade on gut feelings but my gut tells me we could be in for another 2008 like sell-off. That is why I would like to be extra cautious getting back in.

Our only market exposure at this time is the 25% allocated to the Quarterly ETF Portfolio. Unless we see a significant rebound over the next week, we could very well see this portfolio go to all cash for the coming quarter. This portfolio is updated when Barron’s does their Quarter Mutual Fund report. That should be the July 11th issue, which hits the newsstands on the 9th.

Weekly Market Update 1/3/11

It was a holiday week and the markets did pretty much what everyone expected, nothing. It was another very quiet week with little movement or volume. Could this be a calm before a storm. I don’t know but when it is this quiet, you have to wonder. I have seen signs of improved consumer activity in my area. Is it a spillover from the bull market? Is the economy really improving or are we setting ourselves up for failure? Maybe I am a bit pessimistic but I am not convinced that the economy has turned. I will keep a close eye on the markets as trading gets back to normal after the holidays.

Weekly Market Update 1/9/11

Another week and the US indexes continue to inch higher. Friday made for a somewhat ominous Hanging man candlestick formation. I won’t place a trade based only on a candle formation. I am just a bit cautious at this point, do to tremendous move we have seen .in the SPY. I have moved the stop on the SPY to 124.50.

I thought I would make a quick comment on the employment number released Friday. The headline number was 9.4% unemployment dropping from 9.8% in December. I think that number is very misleading. Until we see job creation in the neighborhood of 300k per month I am suspect of any so-called recovery. We have quite a few economic reports coming out later this week. It will be interesting to see if inflation becomes a concern after the release of the PPI and the CPI. Retails sales and Consumer Sentiment may show some improvement if all the press about Christmas shopping turns out to be true.

Weekly Market Update 1/16/11

It feels like I could be writing the same thing every week. The markets continued their gradual climb. The inflation numbers came in pretty close to the consensus. Energy prices seem to be the main problem so far. I personally thought the retail sales number was a bit disappointing. The media made such a big deal about holiday shopping I thought the numbers should have come in on the high side of the consensus range and instead they came right in the middle.

With this being a holiday shortened week and no major economic numbers coming out, I am not expecting much that might surprise the markets. The Quarterly ETF Strategy returned a respectable 4.3% for the quarter. I will leave our SPY stop in place for the week.

Weekly Market Update 1/23/11

It has been a while but we finally got a lower close on a weekly basis. The market sold off on Wednesday but did not see much follow through on Thursday. Frankly I would like to have seen a multiple day decline to prove to me that the market is still healthy. As I have stated before I am very uncomfortable with the way this market has moved over the last few months. I have not forgot the May 6th flash crash and the money that exited the market in the weeks following that crash. A strong bull market might do a lot to help some people forget the flash crash. Not me I will need more than strong bull move to convince me things are normal again on Wall Street.
I will be moving our stop on the SPY to 125.50.

Weekly Market Update 1/30/11

We had a mixed bag of economic numbers this week. Consumer Confidence and Sentiment were good numbers and didn’t really surprise me due to the lack of bad news over the last couple months. The weekly Jobless Claims number came out higher than expected and continues to stay stubbornly above its 4 week moving average. I would like to think that if there is any truth behind the so called recovery we will see this drop below the 4 week moving average and stay below it.

The markets took a pretty good hit on Friday. I think the main reason for the sell off was probably the situation in Egypt. What happens now will give us some indication as to the health of the overall market. We have reached oversold (on some) levels so if the market is truly healthy the downside from here should be fairly limited. Our stop will stay put at 125.50.

Weekly Market Update 12/5/10

The US stock market indexes had a very good week. It appears the gains had a lot to do with a rebound in the Euro and decline in the Dollar. Now the US indexes are all near their November highs, and showing a negative divergence with RSI. I would not recommend trading based on the negative divergence, for me it is more of a caution sign. This week could prove interesting. Will the dollar continue to decline? Will a decline in the dollar be enough to push the indexes above their November highs? The dollar is pretty oversold on a short-term basis. If the rally in the Dollar from its November lows is truly a change in trend, and I am not sure it is, there should not be much left in this pullback for the dollar. I think this week might see a modest move above the November highs in the US indexes followed by some consolidation.

Weekly Market Update 12/12/10

The US indices had a modest move up for the week. The good news is that the November highs have been taken out. This move came while the dollar gained for the week. That is contrary to the dollar based move we have seen over the last several months. Bullish sentiment numbers continue to increase and suggest that a top may be near. For this reason I will be moving the stop on our SPY position to 120.50.

Weekly Market Update 12/19/10

This feels like it is starting to get a bit repetitive. The markets moved modestly higher this week. There has been, no real surprises, on the economic front. The dollar has managed to find a trading range. And, market sentiment continues to get more bullish
For this reason I will be moving the stop on our SPY position to 122.75.

Weekly Market Update 12/27/10

The markets moved modestly higher again this week. Market sentiment is at levels usually only reached during market tops. That being said as long as the FED continues purchasing our national debt, I am reluctant to call the top. I will be moving the stop on our SPY position to 123.50.

Weekly Market Update 11/7/10

I would like to start by saying thank you to our veterans. I appreciate you and the sacrifices you have made for all of us.

Of all the market moving news this week the Quantitative Easing or QE2 announcement appears to be the one that caused the biggest move. The election results were not much of a surprise and didn’t move the market much Tuesday or Wednesday. The unemployment numbers that came out Friday were better than expected but did not cause much of a move since the market moved so strongly on Thursday.

This week there is not a lot on the economic calendar. The market should be relatively quiet. I would like to see a modest pullback so we can add to our long position. I will be keeping a close eye on our exit since in case the mood of the market changes.

In case you are still having any doubts about whether the Feds POMO operations are having any effect on the equity markets I have added an excellent piece from Tom McClellan. Take a look at the effect the POMO’s have had since January 2009. Here is a link to the article.

http://www.buyandholdisdead.com/public_html/wordpress/in-the-news/

Weekly Market Update 11/14/10

This is the first week the market has lost more than a 0.5% from Friday to Friday since late August. It was a very impressive 10-week move for the markets. Impressive enough to put investor sentiment in a range where we need to be cautious. Also of note stock sales by company insiders, Insider Sales, have increased dramatically. Insiders usually have a good idea of how there business will perform over the upcoming quarters. So when they sell, they think their stock is fairly priced or the outlook isn’t so rosy. There is the possibility that these stock sales are due to fact that the Bush tax cuts have yet to be extended. The question becomes, “Is this a healthy pullback or the beginning of a correction?”

As you know I have struggled to understand this rally, and I have come to the conclusion the rally was primarily due to two things. One was the outcome of the elections and the other the Federal Reserves POMO actions. I am starting to develop a picture of how this might turn out. At some point the POMO actions will have little positive effect. Inflation is already starting to appear in commodity prices. Company margins will be impacted due to rising commodity prices and the inability of companies to raise prices. With margins squeezed earning are unlikely to surprise on the upside. This will mean the stock market will have to sell off. I expect this to occur sometime in the next two quarters.

In the mean time I will be keeping a tight stop and looking to add to our positions if the market looks poised to bounce.

Weekly Market Update 11/21/10

The markets were basically unchanged for the week. If not for the GM offering on Thursday the markets would have been down for the week. When I saw how the market was pumped for the GM IPO, I just got a sick feeling in my stomach. It feels like we are playing a rigged game. It feels like the public just got fleeced on this GM deal. Time will tell if I am right about GM. The Government needs GM to trade to $53 to breakeven. I think it will be quite some time before that price is reached. The other factor that became painfully clear this week is that the Dollar is what seems to be directing this market. The Dollar has been rallying since November 5th, The SPY topped out the 5th. The Dollar has rallied because the Euro is having another scare. This scare happens to be with Ireland. Can Bernanke print money faster than the Euro declines? If the Dollar resumes its decline, which I believe it will due to the Fed’s POMO actions, the stock market should have the wind at its back. At least for the time being.

Weekly Market Update 11/28/10

The markets are starting to get a little choppy here and the positive affects of POMO are starting to fade. The Euro appears to be self-destructing. Having lost 7% this month. This week could be interesting for the Euro since it is extremely oversold and approaching its 200 period moving average. Add to that Spain and Portugal’s debt problems are apparently going to be a focus sooner rather than latter. If the Dollar remains stronger than the Euro, it would likely be bearish for US stock markets. Or should I say less bullish for US stocks. I am a bit anxious to see some retail sales numbers for weekend. If they were much stronger than last year as the media would have us believe, it could be a sign of improving consumer confidence. On the other had it could be cash strapped households trying to save as much as they can. However it turns out, when consumers start spending it is a good thing.

I am moving the stop on SPY to 116.50

Weekly Market Update 9/5/10

The market must have run out of sellers because the economic numbers I saw surely would not have caused a rally one or two weeks ago. The market started the rally on Wednesday based on positive economic data out of China. Does anyone else find that odd? China makes the stuff we buy not vice versa. So what likely happened was there was a lack of any new sellers willing to come to market prior to the holiday weekend.

This rally has successfully pushed us up against resistance and I would be very surprised if we saw another day like the last three. At most I think we have one or two moderate up days before this move tops out. If we do manage a close over 113 on SPY, I will have to reevaluate my position. We are light on domestic economic reports this week. The monetary policy announcements from Canada and England could shed light on the prospects for their economies going forward. President Obama has said he plans to announce a new economic stimulus plan this week. If this is another spending plan I doubt the markets will like it.

Weekly Market Update 9/12/10

Instead of one or two moderate up days like I expected, we ended up with a moderate week. The DJIA, Nasdaq and, S&P 500 were all up less than one percent for the week.

The markets yawned off the new proposed economic stimulus package. After all, it is only a measly $50 billion.

I am feeling like a glass is half empty kind of guy right now. I am just not buying the positive spin on some of these economic numbers. Normally a reduced trade deficit would sound like a good thing right? However when we import nearly everything that tells me we aren’t buying as much as we used to. Exports were up in the report but imports declined 2.1% from the prior month. We will see what the Retail Sales number looks like on Tuesday. Maybe those numbers will make the glass look half full.

We are right up against resistance at 113 again this week. Retail participation in the market has been seasonally week. Any breakout above 113 without retail participation would be suspect. I will be monitoring the market and sending a email out if I make any changes to the intermediate term forecast.

Midweek Update for 9/20/10

Well the SPY managed to close decisively over 113. I am going to have
to bite the bullet and make our intermediate term call bullish. I
recommend making a buy position in SPY for 25% of your portfolio on
the open Tuesday morning.

There are times when things just don’t add up, but you must go with
trend. I would prefer to be adding on a pullback, and I will be
adding to this position if we get one. The market is currently
overbought. However that does not mean a pullback is imminent. That
is why we are opening a position now.

Weekly Market Update 9/19/10

The SPY did manage two closes over 113 and the 14 period RSI did manage 3 closes over 60. Normally I would have to consider moving the short-term call to bullish. However, we have some conflicting signals going on. The QQQQ has decisively closed above the mid June and early August highs. The SPY and the DJIA have not been able to make a convincing close above their mid June and early August highs. In addition to that the volume has been week in the SPY and DJIA. A look at the On Balance Volume also shows the Nasdaq 100 is the only index that has made new highs with good volume.

The economic reports that came out this week were very neutral A New York newspaper is reporting that poll workers are having to file tax withholding forms for the first time ever. If poll workers are required to do this in all states this could give the employment numbers, that come out in October, an artificial boost.

I am waiting to see a couple convincing closes on the SPY before I will change the intermediate term call to bullish. I will send out a mid-week email if that occurs.

Weekly Stock Market Strategy Update 6/5/10

Well my rare but reliable ADX signal is not looking so good. Maybe you were fortunate enough to wait until the final hour of trading on Thursday. If so, you may not have taken the trade. That is usually how I place the trades but since I had back tested this ADX system with a buy stop that is how I placed the trade. Since I suggested this only as a more aggressive trade, hopefully most of you did not take it. I will exit this trade at 104.25 on a stop.

So much for a cascade of buy signals following the ADX buy signal. The buy stop was barely breached on Thursday morning before the selling began. A weak afternoon rally could not even reach the stop level. Friday’s weak employment report was all that was needed to start the sell off. It appears the 104-105 level on the SPY will have to be tested a third time. The more the market sells off the more bullish I am getting. It just becomes a matter of waiting for the market to stabilize and start generating some buy signals. However, just because sentiment has declined and the market has sold off, does not mean we can’t see a prolonged decline.

Weekly Stock Market Strategy Update 6/12/10

The market has found a range that it is comfortable in. Until the SPY has two consecutive closes above 111.50 or below 104.00, it is not entirely possible to no which direction this market will trade in the intermediate term. I think the odds are slightly in favor of a bullish move out of this range. Currently however, it is to early to make a trade based on that assumption. We will have to watch and wait.

Weekly Stock Market Strategy Update 6/20/10

Thursday and Friday the SPY managed to close above 111.50, which I had pegged as resistance. The market is now overbought and looks like it needs to take a breather or sell off a little before it can work its way higher. I have not seen any new buy signals but they could come when the SPY takes out the high of 111.73. There is nothing else to report this week. If signals are generated I will send out a midweek update.

Weekly Stock Market Strategy Update 6/27/10

The SPY traded down Monday thru Thursday. The sell off was a little more than I had anticipated. Now the SPY is oversold and Friday’s consolidating price action indicates that a close above Fridays high could be at least a decent short term buying opportunity. Looking at the charts this week, the possibility of breaking support near 104 on the SPY, needs to be considered. The weekly chart looks as if a Head and Shoulders formation might be in the making. If we do manage multiple closes below support at 104 the target would be around 87. That is quite a sell off from current levels and is by no means what I expect to happen. However since there is such strong support at 104 and the SPY closed near 108, the downside risk is somewhat limited at 4%. If you’re wrong you risked 4%. If you’re right this may be the best buying opportunity for the next three months. This suggestion is based purely on technicals and is not generated by any systems that I watch. For that reason I will not track this as an official buy signal.

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.