Market Timing – Weekly Stock Market Strategy – May 2011

Weekly stock market strategy updates that went out to subscribers during May 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 5/1/11

I have moved the intermediate-term market call to bullish. The upside breakout on Wednesday took my indicators back to bullish. I did not send out a mid-week update because I feel the risk is to high to get back in at these levels.

In case you haven’t heard Fed Chairman Bernake held an unprecedented press conference after the FOMC meeting on Wednesday. The movement in gold since the press conference is a no confidence vote for the dollar. Gold has risen almost 4% since Tuesday. This is also the primary reason behind the move in the stock market. The dollar has lost 17% since last June and the SPY is up 29% over the same time frame. If or when the Dollar decides to take a breather from this massive sell-off the stock market rally is over. The Dollar is nearing major long-term support at 72. The Dollar should get a bounce and the stock markets should see a correction.

Jobless claims again came in solidly above its 4-week moving average. This Friday brings the monthly unemployment figures. This number always has the potential to change the market trend.

Weekly Market Update 5/8/11

Fridays Employment Situation numbers showed an up tick in the headline unemployment rate. The market took the overall release as bullish taking the DJIA up triple digits in early part of the session before giving a good part of those gains back heading into the close. Personally I didn’t see anything that excited me. Some of the less reported releases were showing that the jobs that are being created are of the part-time variety. I can hardly get exited about that. Jobless claims on Thursday were worse than expected too. The 4-week moving average of Jobless Claims jumped over 20,000 from the prior week and is over 40,000 higher than a month ago. Remember I said until we have seen the 4-week moving average decline for a while the economy is not improving.

The markets spent most of the week in correction mode. There are two things that helped in initiating or perpetuating the sell-off. One is the Dollar, and the other rising margin rates on various futures contracts. The Dollar reached long-term support and was due for a bounce. Margin increases in some of the overextended futures helped insure that they would see a short-term correction. I am not so sure it was a coincidence that these two events occurred at the same time. Raising margins on Silver and Crude for example were bound to have a greater effect (cause a larger correction) if they coincided with a rising Dollar. What better timing than when the Dollar reaches a support level that is likely to cause a bounce. If you are willing to take this a step further what are the chances the Fed may have had something to due with encouraging the margin increases. If the futures corrections are large enough, the Fed just might be able to justify QE3.

A stock-bond ratio model that I follow has now turned bearish. We are currently only 25% exposed to the market and I am not changing that at this point. This may however change my desire to buy any dips at this point. I know last week the intermediate-term market call moved back to bullish. Normally I would be looking to buy dips now however, with the change in the stock-bond model I feel much better being mostly in cash.

Weekly Market Update 5/15/11

It was a relatively quiet week. All the major indexes ended the week just about where they started. The Debt ceiling is starting to make more and more headlines. It is possible that this will begin to weigh on the stock market.

Weekly Market Update 5/22/11

It was another quiet week with mild losses for the stock market. The dollar rally has slowed for the time being and the moves in stocks and commodities have paused as well. Rest assured as soon as the dollar starts to move again these other markets will too. The debt problems in Ireland and Greece are again making headlines. Albeit not to the extent they did before. The news is still really bad and you have to wonder how much longer the rest of Europe will be willing to keep bailing out the more indebted nations. Keep an eye on what happens in Europe some of the same things could be coming to a city or state near you.

Weekly Market Update 5/29/11

There was not much excitement in the markets this past week. The economic reports are still painting a less than rosy picture. Unemployment claims were still solidly over 400k. GDP has gone from a respectable 3.1% in Q4 of 2010 to 1.8% in Q1 of 2011. More evidence the economy is far from recovery. This patient is on life support. Friday we have the monthly Employment Situation. I would be surprised if we saw anything positive come out of that report.

I have been working on a theory as to why I think a Third round of quantitative easing , or QE3, is a forgone conclusion. The U.S. has to much debt. $14 Trillion is the number that is often mentioned in the press but this number does not include unfunded liabilities. I have seen estimates that our national debt with unfunded liabilities is as high as $144 Trillions. That is $1.2 Million per taxpayer. Does anyone think we have a chance in hell of paying that off? The Fed knows this, and they are taking advantage of the fact that the US Dollar is the world’s reserve currency. When they print more Dollar bills they are exporting inflation. If you think the world hates us now, wait until they figure this one out. The problem is the Fed has been catching some heat for QE1 and QE2 so they have announced that this operation will end June 30. A few events happening at the same time have caused the Dollar to rally.

Those items are:
The Dollar reached long-term support.
The Euro is in more trouble than the Dollar.
A major retracement in some commodities.
Our economy is not yet in recovery mode.
Currently politicians and voters do not have the cajones to make the tough decisions.

I believe that the bounce in the Dollar and decline in commodities will make it easier for the Fed to justify QE3. However, there will need to be some economic reason that will be used as the primary reason for needing another round of quantitative easing. I could be wrong on this part but a new bear market would do the trick. If the market corrects by 20%, the Fed would feel compelled to do something to support the market. Bernanke himself has said the rising stock market is evidence his policies are working. Therefore a sizeable market correction would give him justification for QE3.

The Euro is in even worst shape than the Dollar. That is good for Bernanke and the Fed. I don’t see how the Euro can survive. France and Germany as well as the European banks will tire of extending counties like Greece, Ireland, Portugal, Italy and Spain more money. I would be surprised if the Euro can last two more years. Remember the motto of the current administration, “Never let a serious crisis go to waste.”

As soon as we see some major economic event, the kind of event that could justify QE3, I think it will then be time to put the “Risk Trade” back on. Until then I think it is probably best to sit on the sidelines and keep our powder dry.

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.