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12302009 May 25, 2010

Posted by easterntiger in Uncategorized.
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Weather Report Interim 12302009

Current Positions  (No Changes)

I(Intl) – exit; S(Small Cap) – exit; C(S&P) – exit ; F(bonds) up to 25%;  G(money market) – remainder

Weekly Momentum Indicator (WMI***) – last 4 weeks, thru 12/30 –  +4.33, -0.32, +2.45, +1.01

Several key market measurements are currently in place and should provide some guidance for the 1st quarter:

  • Most market levels worldwide have stopped to oscillate within a tight range, a range as low as 3% in some cases,  for anywhere from the past 5 to 12 weeks;  they include the S&P500, S&P100, S&P Midcap, Dow Industrials, FTSE (London Stock Exchange), CAC (French CAC 40), Hang Seng (Honk Kong), NYA (New York Composite), Wilshire 5000, & Russell 2000(small caps);
  • In my Weekly Momentum Indicator above, levels show only  1/3 to 4 point changes in the 500 point  S&P100 over each 3 week period, going back 5 weeks;
  • American markets have essentially leveled at a point that is almost precisely at the 50% level starting from the top of October 2007 market  levels  to the March 2009 bottom; this bounce is referred to as a 50% retracement from the low; a major decision, continuing higher or turning lower, is imminent.
  • The impact of declining demand for stimulus in the housing sector is showing up quickly in the form of sharply lower housing sales for the month of November;
  • Final 3rd quarter gross domestic product (GDP) last week indicated a 2.2% increase, which was adjusted downward from last month’s revision of 2.8%, which was itself a downward correction on the original estimate produced in late October of 3.5%;  I’ll say this again – Initial est. +3.5%,         Revision +2.8%, Final +2.2%!!!
  • Special programs put in place to boost the economy in the past year are due to expire in the coming weeks; these include Federal  Reserve purchases of mortgage-backed securities, and extended facilities (relaxed rules) for overnight and other short-term loans to the major banks.

Regarding the TSP funds, weekly strength has been negative since the week of 11/20 and is considered riskier than average.  5 point changes over 3 weeks won’t be enough to change this to positive.

Exceptionally calm markets over many weeks have historically preceded explosive market changes, normally in the direction opposite of the most recent trend.

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