Happy Holidays.

Time to do an alert. Since the last post the US equity market fluctuated up and down. We are back to S&P 1260 mark. S&P is also back to positive for the year 2011.  So, let’s see if that market index can sustain above that for a few days. If it does, consider investing more. If not, you may wish to wait a little. Do what is right for your own risk preference.

There is no big bad news from Europe. It seems that there are green shoots in the US growth from the recent economic and unemployment data.  The market seems to react to negative news well. As a result,  the general mode of the market is positive.  The taste for risky assets like, stocks and gold, is biased to the upside.

GC – Editor

The market was signally to us to go long again for two days on 11/08, 11/09, when it passed the S&P 1260 mark. But it could not hold the level and went down to 1161 today. Until we revisit that CASH/EQUITY level, we should just do short term trading or do nothing. DJIA reaching down to 9600  is probable in the next 3 months.

More immediately the market is due for a oversold bounce, but the trend is down. For those investors holding  stocks for days or weeks, this is not a good time to initiate new long position yet. Then I have been wrong many times before.

Happy Thanksgiving.

GC – Editor

The last few weeks, European negative news apparently managed to overcome positive news in the US.  Today it still does. It seems that institution investors are biased on more  risks aversion. So, I am  carefully watching my equity (all paper assets, US domestic and emerging) holding, including silver and gold in the next few weeks. The S&P has broken the widely reported and watched 1100 today and it is not a good omen for the early October. This price level may become a new ceiling to break through and hold if the market is bounce back from today’s action.

Depending on your investment horizon (short, intermediate, long term), you may not have to do anything. For me, since I am not sure where the market will go from here in October, I think FDIC insured  cash deposits may be a reasonable shelter for me for now. And if I do anything I only  re-balance on days with smaller swings  in price levels.  Do think about what you can risk and act on what you believe — and not what I say or do.

GC – Editor

There are increasing noise in the media about bond prices falling esp. municipals.  PIMCO, the largest bond trading house, seems to have reportedly in the last few months voted against bond for stocks. So the theme next year (or some part of the year) may be the fear of inflation. Or that should be a latent driver that lasts.

This year I have subscribed to two newsletters to benchmark my own view with those ‘experts’ and watch the performance.  It is hard to follow newsletter because of the time lag between a recommendation and the actual trade.  This is especially  true for the short-term (days) trading newsletter. So, while some of the recommendations are good ideas to start.  Better results – good risk to reward– require  our own skills and tools in technical analysis (chart analysis). If you do subscribe to any, please make sure it matches your trading horizon – days, weeks, or months.  For many investors on training wheels, like myself, it is important to learn risk management well, setting stop loss points and staying with the plan.

For the last two years, keeping a trading perspective of 1/2 to 1 years seems to work.  So, I do not plan to post too frequently. It just adds unnecessary noise without adding to noticeably better results.

Dashboard Bar to the right bottom.  This year even our simplest indicator helped, like the Monthly Stock Trend.  For next year, I have added a new tool to the Dashboard: Sector Performance.  You can drill down to individual stocks in each sector.  If you look at this sector tool every week or two, you will  not miss out on some sectors on the move (up or down).  As we go into the 3rd year of expansion (uptrend), getting on the right sector may become more relevant. The notion about risk-on (buy stocks, commodities, metals, oil, emerging countries etc.)and risk-off (sell them) and how that mechanism affects the US major stock indexes is best followed by looking the performance of the US dollars: US$ – now added.  I have removed the oversold and overbought indicators because they have not been helpful. Less is more.

End of the year is not a good time to buy ETF or mutual funds, as you may get hit with unexpected tax liability because the fund are distributing profits. So, if you do trade, stay with individual stock of a company until after 1/1/2011.  This year, it may be  useful to look at possible Roth IRA conversion. Please go to Fidelity or Schwab to search for those assessment tools and articles. With the tax law just past in December, it may make sense to convert (albeit a small amount) for some of you. I would also  add that you need to look at your AMT (Alternative Minimal Tax) as most website tools does not cover that.  Or check with your tax person. As long as your immediate tax outlay for conversion is low (relative to your criteria), you can convert some of your regular IRA to Roth and gain some benefits.  No one know when and  how much taxes will go up to make up for the debt we have accumulated as a nation. But many ‘experts’  expect higher taxes after the effect of the December  tax law wears out.  An opinion on conversion: http://www.genspring.com/documents/Roth-IRA-Conversion-Opportunity-2010-GenSpring.pdf

There are other money management subjects to ponder the next few days: like investing in real estate or other assets, personal estate planning, gifting etc. That should keep many of us busy for a few days before 2011.

Happy Holidays and a Prosperous 2011.

GC – Editor

There are encouraging news that double dip recession is unlikely because of the recent labor and economic reporting. So, general investment sentiments are up and actually quite high historically. The monthly indicators on our right navigation bar is positive. The major indexes have not dipped below their 200 days moving average. The mutual funds managers think that the US equity is cheap based on low P/E. Everything looks rosy. But I will wait a week to see if this move up since August is a whipsaw. Be reminded that the economic condition is still not healthy, the market is anticipating. And we should follow if it resolve to break out to above the August highs. It it does then the dips from here will be shallow for a while.

Gold is still bubbling up despite what Soros said recently about it being the ultimate bubble.

Summary: Be patient for another week if you like to be long. Not a good time to be short when the bus is full of happy investors.

GC – Editor

All three equity market indexes held the Thursday gain and pushed higher, passing the July high-price levels. So, in the near term, technically the market can go up for a few more days to revisit the highs in June. In addition, with the DJIA breaking and holding the 200 Day Moving Average on Friday, the bias is on the upside — probably until the end of the week when another set of economic data and major earnings hits the street. The level to watch on the down slide is DJIA 10100 and 10000. Thing can be choppy with swings the next few days. And trend, if any, will be better established by the end of the week.

The fuel for the upside came from benign earnings this week, Japan’s intervention on the Yen earlier in the week, confirmed by positive European bank stress test result released on Friday midday. As usual the big institutions know more and sooner than us, and can stage for the turn as it happens.

Summary: Wait another week before taking a substantial long position. For now, large daily fluctuation make the general direction unclear.

GC-Editor.

“This is the worst labor market since the Great Depression…The market remains weak, with the overhang of vacant or foreclosed houses weighing on home prices and construction…Most viewed uncertainty about the outlook for growth and unemployment as greater than normal, and the majority saw the risks to growth as weighted to the downside…Bank loans outstanding have continued to contract. Small businesses, which depend importantly on bank credit, have been particularly hard hit.”

The sediment for the ordinary citizens is not going to be good for a few months. The new extension in benefits for those unemployed more than 6 months will only cheer up a small number of people for a few days.

Of course, thing can get better. Or it seems, from the relatively nice earning reports so far. The probability of a slide in the major indexes to test the lows of July is high. If the DJIA slips below 10000, the next strong support level, things can get ugly fast. It seems that from the last few days of market action, the upside from here is limited compare with the abyss below — at least in the short term.

Summary: The few days of strong rally last week seems to be weakening. If you have not lighten up your long positions in US equities last week, you should consider doing it now on any stock rally. Anything can happen, including another week of strong rally. Nonetheless, it seems that as we go forward in the next few weeks, waiting and hoping may increase the risks of paper loss in the short term. Just my opinion for my own accounts. You should consult with you financial advisers before taking any action for yours.

GC-Editor

You may wish to consider taking advantage of this bounce to lighten up your long position. It may go for another few more days, before the arrival of earning announcement for the second quarter. Until we have more clarity, it is best to be nimble if you start any new long position. US dollar is expect to bounced up in the near term while Euro will retreat. Thing may change again after we are done with this bounce.

Summary: Take advantage of the bounce to lighten up on long position because the sentiment is different than April. Investors are reading more stories about a double bottom.

GC – Editor

Summary: It may be wise to take some of our risky assets, like US stocks or Euro off the table for a few weeks or a few month. Use any stock rally the next 10 days to exit. If we are proven wrong, come back in later in the summer.

GC – Editor