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05262011 – Interim May 26, 2011

Posted by easterntiger in economy, financial, markets, stocks.
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Current Positions  (No Changes)

I(Intl) – exit; S(Small Cap) – exit; C(S&P) – exit ; F(bonds) up to 40%;  G(money market) – remainder

Weekly Momentum Indicator (WMI***) – last 4 weeks, thru 5/25

+11.29, -1.75, -15.98,  -7.38

(3wks ago/2wks ago/1 wk ago/this week)

Equities took a turn for the worse since late last week in a rather muted but still significant fashion.

Dozens of 50 day moving averages  (dma) on sectors and indexes were broken on Mondays opening plunge.

Here is a sample:
* Dow Industrials 50 dma is at 12407, below which it has fallen, pierced twice from below this week and failed; this is only the 3rd time below it since breaking above it in early September
* S&P 500’s 50 dma is at 1326; high for the week is 1325
* Russell 2000 small caps 50 dma is at 832.43, currently at 820.89
* EAFE Index, like the I fund, is lower for the 4th week in a row, broke the 50 and is sitting on the 144 day moving average
* Wilshire 5000’s 50 dma is at 14083, currently at 13998
* New York Stock Exchange composite did not wait on Monday, breaking the 50 dma last Friday
* This is the 4th week of lower lows, in a tight range, for the S&P 100.
* France’s CAC 40 has broken the 50 dma and, earlier today, also broke the 200 day average
* Germany’s DAX and UK’s FTSE have held below their 50’s all week, after breaking on Monday
* Honk Kong’s Hang Seng broke the 200 dma, after breaking the 50 over two weeks ago

The bottom line is that the markets are continuing to weaken, in many sectors, and around the world.

Interest rate yields, like the inverse of our F fund, are flat and holding above their 200 day averages, as if a key decision is about to be made.  If rates break below their 200’s, the F would start another run upward, as rate fall.  However, this might only last as long as the US approaches a key decision in a month on how to handle the tax/budget crisis.  If the world is not convinced of a low-key and cordial process, they could throw caution out the window, begin to dump US treasury bonds in the open market, to reduce their risk, forcing rates quickly higher for days or weeks until higher confidence levels are apparent.

Another few months out, with the debt ceiling decisions postponed due to extensions via government borrowing from our very own TSP balances to fund daily operations, early August looms as the next hard deadline on what happens to the $14 trillion line in the sand.

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