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 – August 2011

Weekly stock market strategy updates that went out to subscribers during August 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 08/07/11

The big news of the week came after the market closed down 5-8% for the week. Standard and Poors downgraded US debt to AA+ from AAA. I am not sure how the stock market will react on Monday. It will probably have some effect on the bond markets, as portfolios may need to be adjusted to satisfy charter requirement for bonds held in various investment grade products. The Employment Situation was also released Friday. Don’t be fooled by the employment rate dropping from 9.2% to 9.1%. The majority of the change can be attributed to a reduction in the workforce, in other words the unemployed who stopped looking for work. This week I will be watching the results of the FOMC meeting and Retail Sales.

Has the correction in the stock market of 10% given the Fed just cause to announce QE3? I think that announcement is getting very close. If we see any more downside in the market I would not be surprised to hear something by the end of the week. I wonder if the S&P downgrade has in anyway tide the hands of the Fed. My gut says “No.”

The market was so bad this week both the intermediate and long-term call have turned bearish. I am glad that our only exposure over the last few weeks has been the 25% we have in the Quarterly ETF Portfolio. I think we could regain some of the losses by the end of the quarter. As I write this Isreal’s benchmark stock index closed down 6.2% and its sounds like we may see more issues with the European debt crisis. Monday could be a very volatile day. We will need to see the markets calm down before looking to enter the market.

Weekly Market Update 08/14/11

There are a few points of interest from an economic standpoint. Tuesday the Fed announced they would continue their ZIRP, Zero Interest Rate Policy, for another two years. Jobless claims finally came in under 400k at 395k. This could still be revised higher. The other big shocker this week was Consumer Sentiment. This survey is directly related to consumer spending. The number was 54.9, which is 9 points lower than last month’s number. Also interesting is this months number was lower than any released during the meltdown of 2008, and is very near the lowest number ever released. Also any numbers this low occurred during an official recession. An official recession is 2 or more quarters of negative GDP growth. GDP for the first quarter was .4% positive but barely. Second quarter GDP came in at positive 1.3% but this can still be revised. I think it is possible we could see negative GDP for the second half of the year.

The volatility in the markets this past week is unprecedented. Even when compared to the sell-off during 2008. One positive take from the markets is that sentiment has gotten so bad it is likely we have put in at least a short term low. We could see a retest of these levels in the coming months. I am waiting for volatility to subside some before looking for a safe entry. Europe has banned the short selling of financial stocks. If you remember we tried that here in the U.S. during the meltdown and it did not work to well. In fact financial stock fell more than 50% after the ban was put in place. This could create some additional volatility this week.

Weekly Market Update 08/21/11

This weeks economic reports did not do anything that would suggest we are not in a recession. The Philly Fed Survey dropped from 3.2 to -30.7. This is a level again, only seen when we are in a recession. The Producer Price Index had a year over year change of 7.2%. And Jobless claims was again back above 400,000.

The price action in the indexes looks as though we are at least testing the recent lows in the stock indices. Last week saw some incredibly bad sentiment readings. The type that are usually associated with market bottoms. So this brings me to the conclusion that we are at a inflection point. If we do not bounce from close to this level we could see the decline continues another 10% minimum. Since I like to lean on the conservative side I would prefer to wait on a buy signal to occur before I get back in. I will keep you posted if anything changes.

Weekly Market Update 08/28/11

We got some mixed signals from this weeks economic reports. First Durable Goods sales were up 4.0% when they were expected to rise a more modest 2.0%. Then Jobless Claims came in at 417,000 and last weeks number was revised to 412,000. I found it quite comical that there were a few pundits that became quite giddy over one positive economic report. We will need to see several months of positive economic reports before we can start getting exited about business activity. Fed Chairman Bernanke failed to announce QE3 at his speech from Jackson Hole, Wyoming as anticipated. Now it is speculated that it will take another real catastrophe for the Fed to do anymore quantitative easing.

I really don’t like saying this but the price action over the last two weeks appears to be forming a flag. In technical analysis a flag formation on the charts is considered a continuation pattern. Meaning it is suggesting a continuation of the recent downtrend. We will need to see a continuation of Fridays price action and see some closes on the SPY over 120 before we can start to negate this bearish pattern. Now is not the time to blindly start buying into the market. We need to see some stabilization then some bullish signals before we can consider getting long this market.

Market Timing – Weekly Stock Market Strategy – July 2011

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

Market Timing – Weekly Stock Market Strategy – June 2011

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