Market Timing – Weekly Stock Market Strategy – October 2011

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.

Market Timing – Weekly Stock Market Strategy – September 2011

Weekly stock market strategy updates that went out to subscribers during September 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 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.”

Market Timing – Weekly Stock Market Strategy – December 2010

Weekly stock market strategy updates that went out to subscribers during December 2010. To receive current weekly update sent to your email, click on the FREE TRIAL link at the top of the page.

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.

Market Timing – Weekly Stock Market Strategy – July 2010

Weekly stock market strategy updates that went out to subscribers during July 2010. To receive current weekly update sent to your email, click on the FREE TRIAL link at the top of the page.

Weekly Market Update 7/3/10

Well the market could not close above June 25^th high and it soon became apparent that 104 on the SPY would be tested. It was breached on Wednesday. Despite the fact that some of the indexes have lost almost 10% over the past two weeks, I do not believe we have seen the last of this sell off. Market sentiment is poor but not bad enough that we should expect a rebound. Last week I mentioned a target of 87 based on a break in a head and shoulders formation. If this market were to act like a true textbook head and shoulders we may see a failed test of the 104 level on the SPY. That should now act as resistance. Looking at the charts the next support level of significance is near 94 on the SPY. This would also be a 50% retracement of the move that started off the March ’09 lows. I have written in the past how I use RSI as a long-term trend indicator. Well with Fridays close the 14-period RSI on a weekly SPY chart closed below 40. To me this officially makes this a bear move. It also makes it more advantages to sell rallies than to buy dips.

Our Quarterly ETF portfolio has taken a beating. The good news is the pain should be over soon. We will be adjusting this portfolio in next week’s newsletter. An early look at the Lipper Mutual Fund Performance Indexes indicates this portion is likely to go 100% into cash.

Weekly Market Update 7/11/10

What a difference a week makes. I am glad I had not placed any new trades based on the bearish moves prior to the holiday weekend. This market feels like the professionals are moving the market around to inflict maximum pain on the average investor. First we have the unexplainable flash crash on May 6^th. Then the markets test the 104 level on the SPY during the last week of May and the second week of June. This should have confirmed 104 as support. Then the markets make a higher high the week of June 14^th. This indicated maybe a bottom was in place and we could expect higher prices. The next week began a sell off that took the market below support at 104, and indicated the possibility of a new leg down. This week the market reverses and gives us its best performance in over a year. I am not sure what to make of this weeks move. I am glad we have been mostly on the sideline except for the Quarterly ETF portfolio, and when we exit those positions on Monday we will be 100% in cash.

Typically a failure of a head and shoulders can be a bullish pattern itself. But I do not trade off chart patterns alone. The interpretation is to subjective for me. Last week I stated that the RSI had indicated we are in a bear market and I will stick by that until the RSI tells me otherwise.

Weekly Market Update 7/18/10

The SPY seems to have found some resistance near 110. The highs Tuesday thru Thursday were very close to that level. Friday the market decided to sell off and closed down 2.5% for the day. Typically a new bull move would brush off its first overbought readings and just keep moving higher. That did not happen this week and confirms my suspicions at least momentarily.

Two weeks ago I indicated we are in a bear market. I would like to take a moment to clarify and adjust my opinion slightly. I have stated previously that a RSI (14 period) close below the 40 level indicates a bear market move. On a daily chart I would call this an intermediate bear move. The SPY RSI closed below 40 on May 6^th, the day of the flash crash. The RSI, on a daily chart, has not traded over 60 since that time so we are still technically in an intermediate term bear move. I also look at the RSI on a weekly chart to indicate long term moves in the market. During the week of July 2^nd the weekly RSI closed below 40. On a weekly level I would like to see the market trade below the low of the week that generated the RSI reading below 40. We did not have that so the long-term RSI bear signal was not confirmed. However a close below 101.13 would confirm a new long-term bear move.

Weekly Market Update 7/25/10

The SPY managed to close over resistance at 110. This is a good short-term sign for the bulls. The next level of resistance will be between 112 and 113. I think this will be a much more significant level than 110.

About 85% of the S&P 500 companies that have reported earnings in the last two weeks have beaten estimates. Yet the SPY is up only a little over 2% during that same time frame. The markets appear to have run up in anticipation of a positive earning season. Now the question is, “What will drive the markets from here?” I am not going to try and pretend I know the answer. However if the market struggles from this point, the implications would clearly be a negative for the markets going forward. Maybe letting the Bush tax cuts expire will be the catalyst. Raising taxes in this fragile economy, I think is a recipe for disaster. Some of the news stories I am reading are implying that the Bush tax cut debate will be used to sway votes in the elections this fall. Are our representatives in Washington so psychologically disturbed they are willing to risk an economy, on the edge of a depression, to garner a few votes?

Market Timing – Weekly Stock Market Strategy – February 2010

Weekly stock market updates that went out to subscribers during February 2010. To receive current weekly update sent to your email, click on the FREE TRIAL link at the top of the page.

Weekly Market Update 2/6/10

I recommend going 60% long on
the open Monday if the SPY is trading above 106.66 but below 107.73.
Once filled place stop at 104.25.

My thoughts on this week’s market

As expected the market managed a modest bounce early in the week. For
those inclined it set up a nice opportunity to sell on Thursday. That,
however, is not the purpose of this newsletter. The market continued
to sell-off until the final hours of the week. The sell-off that
began on Thursday seemed to be brought on by fears of possible debt
defaults by a few of the smaller members of the European Union, and
fear about pending jobs data. What brought the market from -1.75% to
close with a modest gain on Friday, is a little less certain. It
appears that the rebound was technical in nature. Be that as it may,
it is a positive sign that investors became less fearful of holding
stocks over the weekend. I think the lows put in on Friday could
possibly be at least an intermediate term low, that should hold for
a least a month.

In previous emails I have mentioned my use of the 3-period RSI on
daily charts. I like to use it on the weekly charts as well. The
3-period RSI closed below 20 on Friday. This sets up what I believe
is a good point to buy on the intermediate time frame. The last such
opportunity came in July of last year. I am recommending a buy on
Monday morning if the SPY is trading above Fridays close at 106.66.
There is a real possibility the market could gap open significantly
higher. If the gap up is over 1% or 107.73, I would recommend
waiting for a better entry. Friday’s low of 104.58 should hold if
this pullback is over.

Midweek update 2/8/2010

The follow through I was anticipating has not materialized. If you
place your trades for the close, do not place your trade today. If
you did buy this morning as the SPY traded briefly above 106.66,
exit the trade on your first profitable close.

I apologize I was expecting more follow through on the open. A lack
of follow through changes my outlook.

Weekly Market Update 2/14/10

I had recommended going long
last Monday but the opening was not as strong as I had anticipated.
For that reason I sent out an email Monday suggesting no entry or
getting out on the first profitable close. The first profitable close
would have been Tuesday, so thankfully nobody should have taken a loss.

My thoughts on this week’s market

As you know I had expected some follow through from the market
activity of Friday February 5th. When the Mondays open looked as
though the open would be unchanged to modestly higher, I became
suspect. If the market couldn’t pick up any more believers over the
weekend I figured the upside this week would be limited. That is
exactly what we got. The market has seen some serious technical
damage over the last few weeks. At the very least we should see a
test of the February 5th lows and we could possibly see a move lower.
For that reason I think it is best we sit on the sidelines and wait
for a better entry.

Weekly Market Update 2/20/10

The markets had a good week this week. Even though it looks as
though we may have seen a tradable low, I am not convinced. I don’t
know about you, but I am hearing “trillion dollars,” with a little
too much frequency. This week’s edition came in the form of the Pew
Report. I will some it up for you, our states have a trillion dollar
gap in pension liabilities. The states can’t print money, so they
will have to raise taxes, reduce liabilities or both. Raising taxes
and reducing expenditures do not sound like ways to get out of a
recession.
From a technical standpoint the markets are now overbought. The
question is, is the market in a trading range, overbought in a new
down leg, or still in an uptrend? I think it is one of the first two.
If we are in a trading range it is most probably bound by January
19th high and the February 5th low, and the market would probably be
stuck in that range for 4 to 6 months. I however think it might be a
little more likely that we are currently overbought in a new down
leg. If I am correct we probably won’t see the markets trade much
higher than Fridays close this coming week.

Weekly Market Update 2/27/10

It was a relatively tame week. The SPY’s range for the whole week
was slightly more than the 2%. The highs from last Friday did hold
as predicted. The market has come off overbought levels and where it
goes this week is a little less certain. There is resistance at
111.60; we could test that this week. If we see a close over 111.60
then the January highs near 115.15 would probably be the next target.
On the other hand if the market is unable to close over 111.60 this
week, the February lows are probably going to be the next target.
Overall it is a bit less clear how things will pan out this week.
With a unemployment report coming Friday, it is possible to have
another tame week.