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05042012 – Alert May 4, 2012

Posted by easterntiger in economy, financial, markets, oil.
Tags: , , , , , , , ,
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Current Positions  (No Changes)

I(Intl) – exit

S(Small Cap) – exit

C(S&P) – exit

F(bonds) – up to 60%

G(money market) – remainder

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Weekly Momentum Indicator (WMI***see 110111 for reference)

Last 4 weeks, thru 5/4

-12.96, -14.58, +2.25, -0.81

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

In the past month,

* there are back-to-back, weaker than expected non-farm payrolls (jobs) reports for the US,

* UK has entered a double dip recession, joining Spain, Italy and the Netherlands, who’ve all had lower than expected services sector strength reports. The services sector is already the lowest paying sector of the economy, so, this does not bode well for the broader economies of each.

* Spain received a two-notch downgrade in it’s credit rating by Standard & Poor’s,

* Australia lowered their key interest rate, reflecting slowing conditions,

* interest rates have pushed to multi-month lows, once again, reflecting upon the low confidence in the long term economic stability, and keeping the F fund near recent high levels,

* oil has blasted back to levels not seen since December under the prospect of less hiring and it’s implications.

From a structural standpoint on the stock sector, this week’s weakness shows that there is no way to suppress this same underlying weakness, even underneath the masks of a new 4-year high in the Dow Industrials index this week, or from promises of more artificial support from Federal Reserve, as in, hints of central planning and temporary support to very narrow areas of the economy (finance, banking, etc.).

More signs of this weakness can only be delayed for so long before they show up in the daily measurements.

From a risk/reward perspective, the past two months have become all risk and absolutely no reward.  But, oh, you say ‘so, why haven’t I lost any money?’

Here’s why.

Here are some recent closing prices on the S&P100, S&P500 (our C fund) and Russell 2000(small caps, our S fund)
3/13, 633; 1396; 831
3/14, 633; 1394; 823
3/22, 634; 1393; 821
3/23, 635; 1397; 830
4/4, 636; 1399; 820
4/5, 635; 1398; 818
4/12, 631; 1387; 808
4/17, 632; 1390; 810
4/25, 633; 1391; 812
4/27, 637; 1403; 825
4/30, 635; 1398; 816
5/1, 639; 1405; 815
5/2, 637; 1402; 818

Are you getting this yet?

If the current 2-month ‘trading range’ near the highs of the year do not hold, a substantial correction back toward November or October lows could be in the cards.

The F fund is still the safe and profitable place to be, as has been the case for much of the year.

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