Dear Investors,
Either we’re 7.3% into a correction or we’re at the start of a new bear market.
As I mentioned in my new special report, Dow Theory issued a sell signal last week and all major indexes are below their 200 day moving averages and sitting near their two month lows.
Like last week, the market attempted a rally on a holiday shortened Friday but the S&P still ended down -1.2% on the week and -7.0% so far for November.
By way of comparison, Wall Street Sector Selector gained 1.67% last week and is down -3.3% for November.
What I said last week still holds true this week: “Overall market risk is very high and strength is weak.”
How We’re Doing
We gained ground this week as our two open positions aren’t closely correlated to the S&P and so went up as the S&P went down.
Year to Date we stand at +20.62% compared to +1.7% for the S&P500.
The market is at a crossroads. It is extremely oversold, and either we’ll see a bounce and a resumption of the upward momentum or we’ll continue downwards into a new bear market.
The Week Ahead
The week ahead is a busy one with many potential market moving reports.
Reports we’ll be watching are:
Existing Home Sales—Tuesday
Case-Shiller Home Price Index—Tuesday
Durable Goods Orders—Wednesday
Fed Beige Book Report on Economic Activity—Wednesday
New Home Sales—Thursday
3rd Quarter Revised GDP Report—Thursday
October Construction Spending—Friday
Sector Spotlight
Leaders:
Energy
Commodities
Agriculture
Bonds
Laggards:
Asia, led by China
Home Construction
Finance
Real Estate
I hope you had a wonderful and peaceful Thanksgiving Holiday and weekend. We had a wonderful day with by big son home from college and just the four of us together. With kids off to college or grown, your family changes and its nice to regroup into the old unit and laugh about bygone days and good times we shared together.
We celebrated with all the usual waistline busting traditions and cheered my young son who brought home straight As on his first high school report card. Mt. Bachelor is open for skiing and I’m waiting impatiently for my elbow to heal so I can make a few early season turns.
Wishing you the best for a peaceful Sunday and week ahead.
Your partner in prosperity,
John Nyaradi
Publisher
Wall Street Sector Selector
http://www.wall-street-sector-selector.com
Sunday, November 25, 2007
Saturday, November 17, 2007
Is That a Bear Knocking? Part2
Hi, Friends,
Is that a bear knocking?
I asked that rhetorical question last week, and this week, the answer remains the same. Perhaps. But overall, the market looks as weak as it has since summer’s swoon, now reaching oversold conditions and sitting on two month lows.
The midweek rally faded to a fractional gain for the week, and the leadership rotation out of Asia and tech. stocks has been nothing short of breathtaking with the NASDAQ down 7.8% and the China MSCI Index down 18.36% since Halloween..
Month to date, only 14 ETFs out of the 72 I monitor show any kind of short term strength, down from 18 last week. Overall market risk is very high and strength is weak.
How We’re Doing
This week we continued raising cash in the portfolio in response to the deteriorating conditions when we were stopped out on Monday with a 6.93% gain in IXP and 13.96% gain in EEM for the trades entered in September. Both of these stop losses demonstrate the rotation out of Asia and the weakness and volatility in those markets.
Leaving China 25 Index last week was a positive for us, as this index dropped another 5.9% from our stop loss point and is now down 19% from its peak just two weeks ago. We will certainly reenter this position sometime in the future but, for now, will stand aside.
Profunds recently introduced a short China 25 index that moves at double the index. The launch was met with great fanfare and already is trading close to a million shares a day, but this one would be a real roller coaster ride considering the underlying volatility of this index. This one’s too aggressive for my blood and I think would be very difficult to trade. But if you’re right, you’re going to be really right, and if you’re wrong, it’s going to be painful.
Overall, September trades returned 11.9% in realized gains in approximately two months, October trades a -0.74% return, and for November we are down -5.0% with two positions remaining open. The S&P 500 is down -5.9% for November.
Year to Date we stand at +18.96% compared to +2.82% for the S&P500.
As mentioned last week, we’re automatically switching from portfolio accumulation to portfolio protection. With our exit this month from China, Emerging Markets and Global Telecommunications, we are automatically raising cash levels in the portfolio to protect us from further declines in the market. If this decline continues, we will continue getting stopped out and locking in gains or minimizing losses.
Our two remaining positions are largely uncorrelated to the S@P and should help protect us from further declines in the general market. These are two of the strongest remaining sectors.
If a bear market is confirmed, we will switch to positions on November 1st that can profit from overall downward trends in the markets. Lacking that confirmation, we will consider hedging the portfolio with positions in sectors that are in confirmed bear markets.
The Week Ahead
The week ahead promises to be a quiet one as investors head towards a shortened week and the Thanksgiving Holiday.
Reports we’ll be watching are:
National Association of Homebuilders November report—Monday
October Housing Starts—Tuesday
Conference Board Gauge of Economic Growth--Wednesday
Sector Spotlight
As I mentioned earlier, the leadership in the market has completely changed in just the last two weeks. Month to date the only sectors showing gains are Bonds, Precious Metals and Bearish Dollar, and those gains are miniscule, at best.
Laggards are many of the former leaders; International, Tech., Emerging Markets, Asia and Software.
This rotation into negative columns for so many sectors shows the overall pervasive underlying weakness of the market.
Winter is settling into Bend with snow falling in the mountains and rain blowing the Ponderosa pines outside my living room window. Mt. Bachelor has been shrouded in clouds all day. I’m sure it’s snowing up there and I bought my ski pass this week, so I’m ready for opening day. It’s a nice Friday evening to settle in by the fire with my family for dinner and a family movie.
I wish each of you and your families a very happy and healthy Thanksgiving Holiday.
Your partner in prosperity,
John Nyaradi
Publisher
Wall Street Sector Selector
http://www.wall-street-sector-selector.com
Is that a bear knocking?
I asked that rhetorical question last week, and this week, the answer remains the same. Perhaps. But overall, the market looks as weak as it has since summer’s swoon, now reaching oversold conditions and sitting on two month lows.
The midweek rally faded to a fractional gain for the week, and the leadership rotation out of Asia and tech. stocks has been nothing short of breathtaking with the NASDAQ down 7.8% and the China MSCI Index down 18.36% since Halloween..
Month to date, only 14 ETFs out of the 72 I monitor show any kind of short term strength, down from 18 last week. Overall market risk is very high and strength is weak.
How We’re Doing
This week we continued raising cash in the portfolio in response to the deteriorating conditions when we were stopped out on Monday with a 6.93% gain in IXP and 13.96% gain in EEM for the trades entered in September. Both of these stop losses demonstrate the rotation out of Asia and the weakness and volatility in those markets.
Leaving China 25 Index last week was a positive for us, as this index dropped another 5.9% from our stop loss point and is now down 19% from its peak just two weeks ago. We will certainly reenter this position sometime in the future but, for now, will stand aside.
Profunds recently introduced a short China 25 index that moves at double the index. The launch was met with great fanfare and already is trading close to a million shares a day, but this one would be a real roller coaster ride considering the underlying volatility of this index. This one’s too aggressive for my blood and I think would be very difficult to trade. But if you’re right, you’re going to be really right, and if you’re wrong, it’s going to be painful.
Overall, September trades returned 11.9% in realized gains in approximately two months, October trades a -0.74% return, and for November we are down -5.0% with two positions remaining open. The S&P 500 is down -5.9% for November.
Year to Date we stand at +18.96% compared to +2.82% for the S&P500.
As mentioned last week, we’re automatically switching from portfolio accumulation to portfolio protection. With our exit this month from China, Emerging Markets and Global Telecommunications, we are automatically raising cash levels in the portfolio to protect us from further declines in the market. If this decline continues, we will continue getting stopped out and locking in gains or minimizing losses.
Our two remaining positions are largely uncorrelated to the S@P and should help protect us from further declines in the general market. These are two of the strongest remaining sectors.
If a bear market is confirmed, we will switch to positions on November 1st that can profit from overall downward trends in the markets. Lacking that confirmation, we will consider hedging the portfolio with positions in sectors that are in confirmed bear markets.
The Week Ahead
The week ahead promises to be a quiet one as investors head towards a shortened week and the Thanksgiving Holiday.
Reports we’ll be watching are:
National Association of Homebuilders November report—Monday
October Housing Starts—Tuesday
Conference Board Gauge of Economic Growth--Wednesday
Sector Spotlight
As I mentioned earlier, the leadership in the market has completely changed in just the last two weeks. Month to date the only sectors showing gains are Bonds, Precious Metals and Bearish Dollar, and those gains are miniscule, at best.
Laggards are many of the former leaders; International, Tech., Emerging Markets, Asia and Software.
This rotation into negative columns for so many sectors shows the overall pervasive underlying weakness of the market.
Winter is settling into Bend with snow falling in the mountains and rain blowing the Ponderosa pines outside my living room window. Mt. Bachelor has been shrouded in clouds all day. I’m sure it’s snowing up there and I bought my ski pass this week, so I’m ready for opening day. It’s a nice Friday evening to settle in by the fire with my family for dinner and a family movie.
I wish each of you and your families a very happy and healthy Thanksgiving Holiday.
Your partner in prosperity,
John Nyaradi
Publisher
Wall Street Sector Selector
http://www.wall-street-sector-selector.com
Saturday, November 10, 2007
Is that a Bear Knocking?
Is that a Bear Knocking?
Hi, Friends,
Perhaps, with the S@P 500 now down -6.18% for November amid the continuing shelling of the financials due to the sub prime meltdown. Consumer confidence has sunk to a 13 month low according to the University of Michigan Consumer Confidence Index and the Dow managed to shed -4.1% for the week while the NASDAQ led the parade downward with a weekly loss of -6.5%.
The general market is hanging on above long term trend lines but is now perilously close to bear market status. Only 18 ETFs out of the 72 I monitor show any kind of short term strength. Overall market risk is very high.
We have already automatically shifted our focus from portfolio accumulation to portfolio protection, and if a bear market develops, we will transition to positions and sectors that can continue to profit even as the markets decline.
How We’re Doing
This week’s market action demonstrated some key elements of sector rotation trading.
Here’s a quick synopsis:
Sectors that are hot can turn on a dime and collapse just as fast as they went up. This week we were stopped out of ishares China 25 Index, FXI, for a realized gain of 26.4% since the trade was initiated on September 4th. The reversal in this ETF was breathtaking as it went from a high of $219.56 on October 31st to $182.0 on Friday, a -17.1% loss in 7 trading days. And that’s why trading with stop loss positions are so important in sector rotation.
Diversification across the portfolio is important. Members who entered FXI in September or October walked away with nice gains, but new money added on November 1st suffered a 10% decline in FXI. However, averaged across all five positions, the portfolio is down -3.66% so far in November compared to -6.18% for the S@P 500.
We are automatically switching from portfolio accumulation to portfolio protection. With our exit from the China position, we are automatically raising cash levels in the portfolio to protect us from further declines in the market. If this decline continues, we will continue getting stopped out and locking in gains or minimizing losses.
Two of our positions are largely uncorrelated to the S@P and should help protect us from further declines in the general market. These are two of the strongest remaining sectors and show no signs of weakening yet.
If a bear market is confirmed, we will switch to positions that can profit from downward trends in the markets.
The View from 35,000 Feet
The fly in the ointment, of course, is the continuing fallout from the sub prime lending situation and resultant credit crunch. Financial stocks are widely represented on the S@P and with the likes of Merrill Lynch, Citicorp and Wachovia taking huge hits, the S@P will continue to experience downward pressure.
Furthermore, rising oil prices and a collapsing dollar will add to the general malaise. Fed Chairman Bernanke told Congress this week he expects the economy to slow ‘noticeably” well into next year and he pointed out the problems associated with continuing weakness in the housing sector and potential inflation stemming from rising oil and commodity prices.
All in all, as I wrote a couple of weeks ago, Gentle Ben and his Merry Band of Feds are between a rock and a hard place. They need to continue lowering interest rates to stave off a financial collapse, while at the same time, they need to hold interest rates steady or even raise them to stem inflationary pressures.
The short term solution will be lower interest rates.
Longer term, as the credit crisis and housing problems are worked out, the shift will be to higher interest rates and inflation fighting.
The Week Ahead
Significant reports this week include:
Tuesday: September pending home sales
Wednesday: October retail sales and Producer Price Index reports
Thursday: Consumer Price Index Report
Sector Spotlight
Leaders: Precious Metals, Energy and bearish dollar
Laggards: International, Technology
So, it’s easy to see how quickly market leadership and strength can change or “rotate” from sector to sector. We will maintain our current positions and stops and let the market tell us where it’s going rather than trying to guess what’s going to happen next. The key to success is following a disciplined, unemotional trading system no matter what we hear around us, and on December 1st, we will rebalance the portfolio to reflect what the signals are telling us then. Expect continued volatility through the remainder of this month.
Watch for a new Special Report, “Surviving Sub Prime,” that I’ll send you early next week.
I am an ex Air Force Officer from the Viet Nam era, and, though I was never in combat, appreciate Veteran’s Day as a time to honor our men in uniform and their families, particularly during these troubled times.
Last Veteran’s Day, I arrived in Portland on a flight from Washington, D.C., on a dark, drizzly night and watched a flag draped casket coming off the plane and being met on the ramp by a military honor guard. The soldier’s Mom and Dad were waiting for him on the tarmac, and as his Mother’s hands went to her mouth, I witnessed firsthand the meaning and depth of their sacrifice.
Have a great holiday weekend and please take a moment to honor that soldier and his brave companions.
Your partner in prosperity,
John Nyaradi
Publisher
Wall Street Sector Selector
Hi, Friends,
Perhaps, with the S@P 500 now down -6.18% for November amid the continuing shelling of the financials due to the sub prime meltdown. Consumer confidence has sunk to a 13 month low according to the University of Michigan Consumer Confidence Index and the Dow managed to shed -4.1% for the week while the NASDAQ led the parade downward with a weekly loss of -6.5%.
The general market is hanging on above long term trend lines but is now perilously close to bear market status. Only 18 ETFs out of the 72 I monitor show any kind of short term strength. Overall market risk is very high.
We have already automatically shifted our focus from portfolio accumulation to portfolio protection, and if a bear market develops, we will transition to positions and sectors that can continue to profit even as the markets decline.
How We’re Doing
This week’s market action demonstrated some key elements of sector rotation trading.
Here’s a quick synopsis:
Sectors that are hot can turn on a dime and collapse just as fast as they went up. This week we were stopped out of ishares China 25 Index, FXI, for a realized gain of 26.4% since the trade was initiated on September 4th. The reversal in this ETF was breathtaking as it went from a high of $219.56 on October 31st to $182.0 on Friday, a -17.1% loss in 7 trading days. And that’s why trading with stop loss positions are so important in sector rotation.
Diversification across the portfolio is important. Members who entered FXI in September or October walked away with nice gains, but new money added on November 1st suffered a 10% decline in FXI. However, averaged across all five positions, the portfolio is down -3.66% so far in November compared to -6.18% for the S@P 500.
We are automatically switching from portfolio accumulation to portfolio protection. With our exit from the China position, we are automatically raising cash levels in the portfolio to protect us from further declines in the market. If this decline continues, we will continue getting stopped out and locking in gains or minimizing losses.
Two of our positions are largely uncorrelated to the S@P and should help protect us from further declines in the general market. These are two of the strongest remaining sectors and show no signs of weakening yet.
If a bear market is confirmed, we will switch to positions that can profit from downward trends in the markets.
The View from 35,000 Feet
The fly in the ointment, of course, is the continuing fallout from the sub prime lending situation and resultant credit crunch. Financial stocks are widely represented on the S@P and with the likes of Merrill Lynch, Citicorp and Wachovia taking huge hits, the S@P will continue to experience downward pressure.
Furthermore, rising oil prices and a collapsing dollar will add to the general malaise. Fed Chairman Bernanke told Congress this week he expects the economy to slow ‘noticeably” well into next year and he pointed out the problems associated with continuing weakness in the housing sector and potential inflation stemming from rising oil and commodity prices.
All in all, as I wrote a couple of weeks ago, Gentle Ben and his Merry Band of Feds are between a rock and a hard place. They need to continue lowering interest rates to stave off a financial collapse, while at the same time, they need to hold interest rates steady or even raise them to stem inflationary pressures.
The short term solution will be lower interest rates.
Longer term, as the credit crisis and housing problems are worked out, the shift will be to higher interest rates and inflation fighting.
The Week Ahead
Significant reports this week include:
Tuesday: September pending home sales
Wednesday: October retail sales and Producer Price Index reports
Thursday: Consumer Price Index Report
Sector Spotlight
Leaders: Precious Metals, Energy and bearish dollar
Laggards: International, Technology
So, it’s easy to see how quickly market leadership and strength can change or “rotate” from sector to sector. We will maintain our current positions and stops and let the market tell us where it’s going rather than trying to guess what’s going to happen next. The key to success is following a disciplined, unemotional trading system no matter what we hear around us, and on December 1st, we will rebalance the portfolio to reflect what the signals are telling us then. Expect continued volatility through the remainder of this month.
Watch for a new Special Report, “Surviving Sub Prime,” that I’ll send you early next week.
I am an ex Air Force Officer from the Viet Nam era, and, though I was never in combat, appreciate Veteran’s Day as a time to honor our men in uniform and their families, particularly during these troubled times.
Last Veteran’s Day, I arrived in Portland on a flight from Washington, D.C., on a dark, drizzly night and watched a flag draped casket coming off the plane and being met on the ramp by a military honor guard. The soldier’s Mom and Dad were waiting for him on the tarmac, and as his Mother’s hands went to her mouth, I witnessed firsthand the meaning and depth of their sacrifice.
Have a great holiday weekend and please take a moment to honor that soldier and his brave companions.
Your partner in prosperity,
John Nyaradi
Publisher
Wall Street Sector Selector
Friday, November 2, 2007
Red Flags Green Flags Part 2
Red Flags or Green Flags? Part 2: Wall Street Sector Selector
Hi, Friends,
Is it red flags or green flags? Danger or all clear?
Hard to say with this week’s big sell off, the Fed cutting interest rates again but hinting this was it for awhile and the employment report on Friday. Cross currents and confusion seem to dominate with greed and fear tugging for control of the markets.
For us, it was a busy week with the portfolio rebalance, closing one trade and putting on two new positions for November. We closed out IEZ, U.S. Oil Services, which had been on since September for +4.09% gain in two months, but for new money added in October, IEZ gave up -2.86%. Earlier we were stopped out of Hong Kong Index, EWH, with a +8.6% gain for September trades and a -4.8% loss for trades put on in October.
These results reflect the choppy nature of the market we’re in and the weakness in October, but overall for October, even with the two losses, the system returned us gains of +5.93% compared to +0.15% for the S@P.
And for the first two days of November, we stand at -0.64% compared to -2.6% for the S@P.
The View from 35,000 Feet
The two big market movers this week were, of course, the Fed meeting and rate cut and the employment report on Friday. The Fed continues to catch up to the sub prime mess that we’ve been discussing for weeks, and almost daily, there’s another multi-billion dollar write off from a big financial. This week, Merrill Lynch was the big newsmaker with their CEO’s head rolling over their mounting sub prime losses and Citigroup’s CEO looks close behind with severely declining earnings for the quarter.
Of course, what’s making everyone really nervous is that no one knows for sure how big this is or what the losses on all of these derivatives are going to be, or when it’s going to be over.
I don’t have all the answers, either, but here are some things we do know:
--$800 Billion worth of sub prime loans will reset to higher rates between October, 2007, and December, 2008, and most of these homes were bought at market top.
--A Congressional Committee forecasts 2 million sub prime foreclosures in the next 18 months.
--Foreclosures compared to last year are up +201% in Arizona, +130% in Florida, +920% in Connecticut and +212% in Nevada with many other states in double or triple digit columns.
Beyond that, while the official Department of Labor jobs report showed a gain of 166,000 jobs, their informal telephone poll of households showed a net loss of 211,000 jobs and year over year job growth of just 0.7%.
What It All Means
What I wrote a couple of weeks ago appears to be unfolding:
“The economy is clearly slowing. The sub prime melt down is spreading past financials and since financials are widely represented on the S&P, that broad indicator will experience downward pressure. Oil and the high price of gasoline will act like a tax on the consumer and our petroleum based economy, and it’s hard to make a case for robust growth in the next few months.”
There are plenty of red flags and plenty of danger ahead with the credit crisis, oil heading for $100.bbl. and the consumer getting pinched as the value of his house continues its precipitous decline.
But there are plenty of green flags, as well, for each of these problems presents an opposite opportunity, and that’s what sector rotation is all about. Finding the opportunities that always exist, regardless of what’s happening around us.
The bottom line on all of this is that the probability of recession grows daily, stock prices look weaker in the short term and the Fed will continue lowering interest rates in the months ahead.
For November, I think we can expect a challenging month.
The Week Ahead
This week brings the Benny and the Feds show to Capitol Hill where Chairman Bernanke is scheduled to report to Congress; following Gentle Ben are the monthly retail sales report and the University of Michigan Consumer Confidence report.
Also, all eyes will be focused on Citicorp’s unfolding struggles and 50 more company earnings reports next week.
Sector Spotlight
Energy, international and precious metals remain the leaders. U.S. telecommunications, semi conductors and, of course, financials are the dogs, with real estate close at hand.
As I mentioned above, the short term looks decidedly weak with 75% of the sector ETFs I follow now flashing short term downward prices.
Wednesday was Halloween, and for the first time in many, many years, I didn’t go trick or treating with my kids. My big boy is in college down in Santa Barbara and my young son, now a freshman in high school, was buried in homework and too cool to go out. For all those years that have so swiftly passed, I’d dress like my kids for trick or treating. One year we were pirates, another we were Baby Darth Moll and Big Darth Moll, and my favorite was the old and young Phantom of the Opera, complete with musical score blasting from under my cape.
But my last Halloween is behind me now, and I have to say, it’s depressing. And it occurred to me on Wednesday night as the goblins came to my door, that we really should do everything in life as if it were for the first time or the last time. Because one day, it will be the last time and there’s no instant replay or another chance to go trick or treating next year.
Wishing you the best for a great autumn weekend and week ahead,
John
John Nyaradi
Publisher
Wall Street Sector Selector
http://www.wall-street-sector-selector.com
Hi, Friends,
Is it red flags or green flags? Danger or all clear?
Hard to say with this week’s big sell off, the Fed cutting interest rates again but hinting this was it for awhile and the employment report on Friday. Cross currents and confusion seem to dominate with greed and fear tugging for control of the markets.
For us, it was a busy week with the portfolio rebalance, closing one trade and putting on two new positions for November. We closed out IEZ, U.S. Oil Services, which had been on since September for +4.09% gain in two months, but for new money added in October, IEZ gave up -2.86%. Earlier we were stopped out of Hong Kong Index, EWH, with a +8.6% gain for September trades and a -4.8% loss for trades put on in October.
These results reflect the choppy nature of the market we’re in and the weakness in October, but overall for October, even with the two losses, the system returned us gains of +5.93% compared to +0.15% for the S@P.
And for the first two days of November, we stand at -0.64% compared to -2.6% for the S@P.
The View from 35,000 Feet
The two big market movers this week were, of course, the Fed meeting and rate cut and the employment report on Friday. The Fed continues to catch up to the sub prime mess that we’ve been discussing for weeks, and almost daily, there’s another multi-billion dollar write off from a big financial. This week, Merrill Lynch was the big newsmaker with their CEO’s head rolling over their mounting sub prime losses and Citigroup’s CEO looks close behind with severely declining earnings for the quarter.
Of course, what’s making everyone really nervous is that no one knows for sure how big this is or what the losses on all of these derivatives are going to be, or when it’s going to be over.
I don’t have all the answers, either, but here are some things we do know:
--$800 Billion worth of sub prime loans will reset to higher rates between October, 2007, and December, 2008, and most of these homes were bought at market top.
--A Congressional Committee forecasts 2 million sub prime foreclosures in the next 18 months.
--Foreclosures compared to last year are up +201% in Arizona, +130% in Florida, +920% in Connecticut and +212% in Nevada with many other states in double or triple digit columns.
Beyond that, while the official Department of Labor jobs report showed a gain of 166,000 jobs, their informal telephone poll of households showed a net loss of 211,000 jobs and year over year job growth of just 0.7%.
What It All Means
What I wrote a couple of weeks ago appears to be unfolding:
“The economy is clearly slowing. The sub prime melt down is spreading past financials and since financials are widely represented on the S&P, that broad indicator will experience downward pressure. Oil and the high price of gasoline will act like a tax on the consumer and our petroleum based economy, and it’s hard to make a case for robust growth in the next few months.”
There are plenty of red flags and plenty of danger ahead with the credit crisis, oil heading for $100.bbl. and the consumer getting pinched as the value of his house continues its precipitous decline.
But there are plenty of green flags, as well, for each of these problems presents an opposite opportunity, and that’s what sector rotation is all about. Finding the opportunities that always exist, regardless of what’s happening around us.
The bottom line on all of this is that the probability of recession grows daily, stock prices look weaker in the short term and the Fed will continue lowering interest rates in the months ahead.
For November, I think we can expect a challenging month.
The Week Ahead
This week brings the Benny and the Feds show to Capitol Hill where Chairman Bernanke is scheduled to report to Congress; following Gentle Ben are the monthly retail sales report and the University of Michigan Consumer Confidence report.
Also, all eyes will be focused on Citicorp’s unfolding struggles and 50 more company earnings reports next week.
Sector Spotlight
Energy, international and precious metals remain the leaders. U.S. telecommunications, semi conductors and, of course, financials are the dogs, with real estate close at hand.
As I mentioned above, the short term looks decidedly weak with 75% of the sector ETFs I follow now flashing short term downward prices.
Wednesday was Halloween, and for the first time in many, many years, I didn’t go trick or treating with my kids. My big boy is in college down in Santa Barbara and my young son, now a freshman in high school, was buried in homework and too cool to go out. For all those years that have so swiftly passed, I’d dress like my kids for trick or treating. One year we were pirates, another we were Baby Darth Moll and Big Darth Moll, and my favorite was the old and young Phantom of the Opera, complete with musical score blasting from under my cape.
But my last Halloween is behind me now, and I have to say, it’s depressing. And it occurred to me on Wednesday night as the goblins came to my door, that we really should do everything in life as if it were for the first time or the last time. Because one day, it will be the last time and there’s no instant replay or another chance to go trick or treating next year.
Wishing you the best for a great autumn weekend and week ahead,
John
John Nyaradi
Publisher
Wall Street Sector Selector
http://www.wall-street-sector-selector.com
Red Flags or Green Flags
Hi, Friends,
So, are the warning flags out or is it clear ahead? Red flags flying or green flags with the all clear, pedal to the metal?
Unfortunately for most investors, it's hard to say.
But as I said last week, "the market action and talking heads' speculations are nothing more than background noise. And that's the terrific advantage of having a proven, non emotional trading plan in place that we can depend on in good times and bad."
And that's even more true today with all of the swirling cross currents we face.
How we're doing
The market rallied sharply last week, shaking off the Black Monday fears. But we did get stopped out of Hong Kong in the volatility. September Hong Kong trades made 8.6% while new positions in Oct. lost -4.8%. As the tables above indicate, both September and October trades continue to perform well.
However, in spite of last week's rally, change is in the air, and our indicators are flashing short term weakness. The action in Hong Kong, today's new stop loss points and next week's rebalance will reflect this rapidly changing environment.
Subscribers need to watch for your Stop Loss Update later today and have your stops in place before market open on Monday. The closer you are able to follow the system's entry and exit points, the more likely your chances of success.
The View from 35,000 Feet
A mixed bag to be sure. Here are some of the significant developments accompanying last week's rally:
Negative earnings growth so far for the S&P. With 218 companies reporting next week, this continued trend would result in first negative growth quarter in five years.
28 year high in gold hitting $787/oz.
Record low U.S. Dollar against the Euro.
Record high oil touching $92/bbl.
Home sales down 19% from one year ago
National Association of Homebuilders reports lowest index ever.
2 million home foreclosures forecast over next two years by Joint Economic Committee Chairman Senator Charles Schumer.
So, where did the fear go from last week, and why did it so swiftly depart? The answer, of course, lies with Benny and his Merry Band of Feds and their Halloween meeting this week.
The market has already priced in that it will be treat instead of trick and is planning on a 25 basis point rate cut in its candy bag. I wrote after last month's cut that more cuts would be coming and they will be, right or wrong, for the dollar and inflation.
The Week Ahead
Next week will have more than 200 companies reporting earnings with the possibility of the first negative earnings growth in five years.
We'll also see the October employment report on Wednesday and the 3rd Quarter GDP estimate.
And of course, the biggie is the two day Fed meeting ending Wednesday.
What It All Means
Cross currents and confusion. Volatility, too. And as I wrote last week, "a recession in 2008 is so politically unpalatable that we'll see plenty of Fed intervention in hopes of making the proverbial soft landing."
Interestingly, we'll be rebalancing the portolio right after the Fed meeting, so Thursday will be an important day.Sector Spotlight
The hot sectors this week were energy, commodities and gold with Real Estate, Financials and Home Construction being the bottom feeders.
Last Wednesday, I had elbow surgery for some "boomeritis" and I learned firsthand the truth in the old saying that "it's minor surgery unless it's on you."
My right arm looks like a bandged prop from a Frankenstein movie, and typing this report one handed has been a challenge. Definitely makes one appreciate full mobility.
Have a great weekend and Happy Halloween and be sure to watch for your stop loss update today and portfolio rebalance on Wednesday.
Your partner in prosperity,
John Nyaradi
Publisher
Wall Street Sector Selector
http://www.wall-street-sector-selector.com
So, are the warning flags out or is it clear ahead? Red flags flying or green flags with the all clear, pedal to the metal?
Unfortunately for most investors, it's hard to say.
But as I said last week, "the market action and talking heads' speculations are nothing more than background noise. And that's the terrific advantage of having a proven, non emotional trading plan in place that we can depend on in good times and bad."
And that's even more true today with all of the swirling cross currents we face.
How we're doing
The market rallied sharply last week, shaking off the Black Monday fears. But we did get stopped out of Hong Kong in the volatility. September Hong Kong trades made 8.6% while new positions in Oct. lost -4.8%. As the tables above indicate, both September and October trades continue to perform well.
However, in spite of last week's rally, change is in the air, and our indicators are flashing short term weakness. The action in Hong Kong, today's new stop loss points and next week's rebalance will reflect this rapidly changing environment.
Subscribers need to watch for your Stop Loss Update later today and have your stops in place before market open on Monday. The closer you are able to follow the system's entry and exit points, the more likely your chances of success.
The View from 35,000 Feet
A mixed bag to be sure. Here are some of the significant developments accompanying last week's rally:
Negative earnings growth so far for the S&P. With 218 companies reporting next week, this continued trend would result in first negative growth quarter in five years.
28 year high in gold hitting $787/oz.
Record low U.S. Dollar against the Euro.
Record high oil touching $92/bbl.
Home sales down 19% from one year ago
National Association of Homebuilders reports lowest index ever.
2 million home foreclosures forecast over next two years by Joint Economic Committee Chairman Senator Charles Schumer.
So, where did the fear go from last week, and why did it so swiftly depart? The answer, of course, lies with Benny and his Merry Band of Feds and their Halloween meeting this week.
The market has already priced in that it will be treat instead of trick and is planning on a 25 basis point rate cut in its candy bag. I wrote after last month's cut that more cuts would be coming and they will be, right or wrong, for the dollar and inflation.
The Week Ahead
Next week will have more than 200 companies reporting earnings with the possibility of the first negative earnings growth in five years.
We'll also see the October employment report on Wednesday and the 3rd Quarter GDP estimate.
And of course, the biggie is the two day Fed meeting ending Wednesday.
What It All Means
Cross currents and confusion. Volatility, too. And as I wrote last week, "a recession in 2008 is so politically unpalatable that we'll see plenty of Fed intervention in hopes of making the proverbial soft landing."
Interestingly, we'll be rebalancing the portolio right after the Fed meeting, so Thursday will be an important day.Sector Spotlight
The hot sectors this week were energy, commodities and gold with Real Estate, Financials and Home Construction being the bottom feeders.
Last Wednesday, I had elbow surgery for some "boomeritis" and I learned firsthand the truth in the old saying that "it's minor surgery unless it's on you."
My right arm looks like a bandged prop from a Frankenstein movie, and typing this report one handed has been a challenge. Definitely makes one appreciate full mobility.
Have a great weekend and Happy Halloween and be sure to watch for your stop loss update today and portfolio rebalance on Wednesday.
Your partner in prosperity,
John Nyaradi
Publisher
Wall Street Sector Selector
http://www.wall-street-sector-selector.com
Prepping for Monday
Prepping for Monday
Hi, Friends,
Not a good week last week, made worse by the media’s incessant fear mongering about the 20th anniversary of Black Monday on October 19, 1987.
But, for us, the market action and talking heads’ speculations are nothing more than background noise. And that’s the terrific advantage of having a proven, non emotional trading plan in place that we can depend on in good times and bad.
Our indicators accurately called the beginning of this run, and now are flashing some short term weakness. The S&P looks decidedly high risk short term, and although most of our positions are not S&P components, in stressful times, all markets around the world move as one.
To respond, we’ll be tightening our stops for Monday morning. Subscribers need to watch for your Stop Loss Update later today and have your stops in place before market open on Monday. The closer you are able to follow the system’s entry and exit points, the more likely your chances of success.
In spite of the short term weakness, all up trends in our positions remain firmly in place.
The View from 35,000 Feet
This week’s sell off was prompted by the poor earnings reports from the financials and industrials. Everyone knew there were big hits coming due to the sub prime morass but the reality of billion dollar write offs was a staggering hit to the markets, sending the DOW down 360+ points on Friday and -2.64% for the day and -4% for the week. The S&P did no better, down -2.56% on the day and -3.9% for the week.
A strong whiff of fear was in the air as investors mulled over the weak earnings, the weaker dollar and oil breaking the $90/bbl. More and more the talk is of recession as the housing woes spill over into the general market. And this story isn’t over yet as most of the sub prime resets to higher interest rates is scheduled for first quarter next year.
Reflecting this reality, Fed Chairman Gentle Ben Bernanke on Monday said that the housing negative pull on the economy was getting worse and would hurt growth for the Fourth Quarter and into 2008.
As I wrote last week, Benny and his Merry Band of Feds are between a rock and a hard place, worrying about inflation while having to cut interest rates to prevent a recession in a Presidential Election year, and all indications point to the rock getting bigger and the hard place getting harder. As the bad news unfolded this week, the Fed meeting on Halloween looms bigger in the background.
The Week Ahead
Next week will have more than 160 companies reporting earnings. More than 120 have reported so far and earnings growth is in the negative column. Next week’s focus is on tech and health care as well as at lest six Dow companies reporting. Also, September Durable Goods, weekly jobless numbers and home sales reports will give investors plenty of data to chew on.
What It All Means
The economy is clearly slowing. The sub prime melt down is spreading past financials and since financials are widely represented on the S&P, that broad indicator will experience downward pressure. Oil and the high price of gasoline will act like a tax on the consumer and our petroleum based economy, and it’s hard to make a case for robust growth in the next few months.
All of this points to Benny and his Merry Band of Feds and their Halloween meeting. More bad news this week could easily lead to a rate cut and a month end rally. Will it be trick or treat? No one can make that call, but we’ll be ready for either eventuality.
My view is that a recession in 2008 is so politically unpalatable that we’ll see the Feds manipulating the markets and the economy in hopes of making the proverbial soft landing and easy money will lead to market gains leading into next year.
Sector Spotlight
This weekend we’re in Hood River, Oregon, for a swim meet with my young son and the Hood River Fall Festival. If you’ve never been here, Hood River is a quaint little town on the banks of the Columbia River with a rural valley setting known as “the fruit loop” to sightseers. The fall foliage brings a ton of “leaf peepers,” and from the valley you can see the snowy volcanic peaks of Mt. Hood to the south and Mt. Adams across the river to the north. Framed in brilliant yellows and reds, it’s truly a spectacular setting.
For ten years we’ve come here, watching the kids swim and stopping at Rasmussen’s Farm for pumpkins, caramel apples, boxes of pears and apples, and spruce cider, a local “delicacy.” It’s always a fun time, and as the leaves blow across the wet ground, the salmon return home to their spawning grounds in Hood River and goblins start showing up on front lawns, one knows that deep autumn and harvest time are here.
Wishing you the best for a great autumn weekend and week ahead,
Your Partner in Prosperity,
John Nyaradi
Publisher
Wall Street Sector Selector
http://www.wall-street-sector-selector.com
Hi, Friends,
Not a good week last week, made worse by the media’s incessant fear mongering about the 20th anniversary of Black Monday on October 19, 1987.
But, for us, the market action and talking heads’ speculations are nothing more than background noise. And that’s the terrific advantage of having a proven, non emotional trading plan in place that we can depend on in good times and bad.
Our indicators accurately called the beginning of this run, and now are flashing some short term weakness. The S&P looks decidedly high risk short term, and although most of our positions are not S&P components, in stressful times, all markets around the world move as one.
To respond, we’ll be tightening our stops for Monday morning. Subscribers need to watch for your Stop Loss Update later today and have your stops in place before market open on Monday. The closer you are able to follow the system’s entry and exit points, the more likely your chances of success.
In spite of the short term weakness, all up trends in our positions remain firmly in place.
The View from 35,000 Feet
This week’s sell off was prompted by the poor earnings reports from the financials and industrials. Everyone knew there were big hits coming due to the sub prime morass but the reality of billion dollar write offs was a staggering hit to the markets, sending the DOW down 360+ points on Friday and -2.64% for the day and -4% for the week. The S&P did no better, down -2.56% on the day and -3.9% for the week.
A strong whiff of fear was in the air as investors mulled over the weak earnings, the weaker dollar and oil breaking the $90/bbl. More and more the talk is of recession as the housing woes spill over into the general market. And this story isn’t over yet as most of the sub prime resets to higher interest rates is scheduled for first quarter next year.
Reflecting this reality, Fed Chairman Gentle Ben Bernanke on Monday said that the housing negative pull on the economy was getting worse and would hurt growth for the Fourth Quarter and into 2008.
As I wrote last week, Benny and his Merry Band of Feds are between a rock and a hard place, worrying about inflation while having to cut interest rates to prevent a recession in a Presidential Election year, and all indications point to the rock getting bigger and the hard place getting harder. As the bad news unfolded this week, the Fed meeting on Halloween looms bigger in the background.
The Week Ahead
Next week will have more than 160 companies reporting earnings. More than 120 have reported so far and earnings growth is in the negative column. Next week’s focus is on tech and health care as well as at lest six Dow companies reporting. Also, September Durable Goods, weekly jobless numbers and home sales reports will give investors plenty of data to chew on.
What It All Means
The economy is clearly slowing. The sub prime melt down is spreading past financials and since financials are widely represented on the S&P, that broad indicator will experience downward pressure. Oil and the high price of gasoline will act like a tax on the consumer and our petroleum based economy, and it’s hard to make a case for robust growth in the next few months.
All of this points to Benny and his Merry Band of Feds and their Halloween meeting. More bad news this week could easily lead to a rate cut and a month end rally. Will it be trick or treat? No one can make that call, but we’ll be ready for either eventuality.
My view is that a recession in 2008 is so politically unpalatable that we’ll see the Feds manipulating the markets and the economy in hopes of making the proverbial soft landing and easy money will lead to market gains leading into next year.
Sector Spotlight
This weekend we’re in Hood River, Oregon, for a swim meet with my young son and the Hood River Fall Festival. If you’ve never been here, Hood River is a quaint little town on the banks of the Columbia River with a rural valley setting known as “the fruit loop” to sightseers. The fall foliage brings a ton of “leaf peepers,” and from the valley you can see the snowy volcanic peaks of Mt. Hood to the south and Mt. Adams across the river to the north. Framed in brilliant yellows and reds, it’s truly a spectacular setting.
For ten years we’ve come here, watching the kids swim and stopping at Rasmussen’s Farm for pumpkins, caramel apples, boxes of pears and apples, and spruce cider, a local “delicacy.” It’s always a fun time, and as the leaves blow across the wet ground, the salmon return home to their spawning grounds in Hood River and goblins start showing up on front lawns, one knows that deep autumn and harvest time are here.
Wishing you the best for a great autumn weekend and week ahead,
Your Partner in Prosperity,
John Nyaradi
Publisher
Wall Street Sector Selector
http://www.wall-street-sector-selector.com
Thursday, October 25, 2007
Up Nineteen Percent in Six Weeks
October 14, 2007
Hi, Friends,
We are in the midst of a powerful uptrend across all markets and most sectors, but as always, caution is necessary.
Since initiating our positions on September 4th, we're up 19% in unrealized gains in six weeks, and new positions placed on October 1st are up 5.6%.
Almost every sector is showing gains and the broader markets are all in up trends as the Dow and S&P500 both broke into record territory this week.
However, I'm never too excited about new records as they can be followed by sharp sell offs like the 10% drawdown this summer that came right after passing Dow 14,000 for the first time.
But for now, all of our positions remain in strong short and medium term up trends and we will be following them upwards with trailing stops to lock in these gains because it's always critical to not get complacent when the market is going our way.
Watch your inboxes this week for a new Special Report I've just written.
I've written 5 new Special Reports which are now included as Free Gifts with your guaranteed subscription.
Tthey're packed with good information and insight and you can learn more about them at
http://www.wall-street-sector-selector.com/
The View from 35,000 Feet
This week's move upward was driven by stronger than forecast retail sales and no nasty surprises in the beginning of earnings season. The tech. market went through a nasty gyration downwards on Thursday only to rally again on Friday, and oil hit a record close on Friday of $83.69/bbl. Also, there was an unexpected rise of 1.1% in the PPI, driven mostly by food and energy.
The Week Ahead
Several important reports are coming out this week which will be market movers along with earnings reports that will be coming all week:
Tuesday:
Wells Fargo reports earnings, the first of the big banks and a look at how the financials are faring after the credit crisis.
Wednesday:
JP Morgan Chase reports earnings
Sept. Housing Starts
Fed. Beige Book Report on economic activity
September Housing Starts
Thursday:
Bank of America reports earnings
Leading Economic Indicators
What It All Means
We continue to have a mixed picture as far as news is concerned and are in a very interesting tug of war between the forces of inflation and a slowdown in the economy.
On the one hand, the retail sales report, while considered good, was essentially flat when you remove gasoline and auto sales, and on the other hand, we have a rising Producer Price Index and energy prices that rose 4.1% last month alone.
Of course, Benny and the Feds are watching all of this closely and will use these inputs to decide their course at their Halloween meeting.
Fed watchers continue to play their "what will the Fed do with rates" game, and the picture is decidedly cloudy today with recent news pointing to rates staying steady at the end of October.
However, I expect that this week's reports will help to substantially clear up the picture and give us a more focused view of what the Feds might do.
But, as always, it's important to remember that Wall Street Sector Selector doesn't trade on news, which tends to be a poor predictor of market action, but rather based on our indicators which give us a view ahead for the next 4-8 weeks.
Sector Spotlight
Almost all sectors are in up trends for the month with International and Energy still leading the way. Homebuilders and Real Estate are in the positive column, and as I mentioned last week, I'm watching these two closely. While it's much too early to take a position in these, it's interesting to watch them come out of the negative column after so many months, especially with all of the negative news surrounding these sectors.
Autumn in Bend has been particularly beautiful this year with the changing leaves exploding across our town. In the mountains, golden aspen are sprinkled throughout the conifer sea, and this Saturday morning, Mount Bachelor glistens snowcapped in the sunshine outside our living room window.
Today my young son and I are heading for Twin Lake for a last night out in our R.V. and then I'll winterize and store it for winter this week. That's always the definitive close of summer around our house and something of a melancholy time. Summer is over and we're heading into the darker months, but looking at the snow capped mountain, it's exciting to think of ski season just ahead.
If you compare a human life span of 84 years to the calendar, October would be the start of a person's 64th year. It's a beautiful month, and for many people I know, a beautiful time of life.
My goal with Wall Street Sector Selector is to make all our months and years truly golden, and I greatly appreciate your confidence and trust in that important endeavor.
Have a great weekend.
Your partner in prosperity,
John Nyaradi
Publisher
Wall Street Sector Selector
http://rs6.net/tn.jsp?t=95n8pfcab.0.0.eou954bab.0&ts=S0289&p=http%3A%2F%2Fwww.wall-street-sector-selector.com%2F&id=preview
Hi, Friends,
We are in the midst of a powerful uptrend across all markets and most sectors, but as always, caution is necessary.
Since initiating our positions on September 4th, we're up 19% in unrealized gains in six weeks, and new positions placed on October 1st are up 5.6%.
Almost every sector is showing gains and the broader markets are all in up trends as the Dow and S&P500 both broke into record territory this week.
However, I'm never too excited about new records as they can be followed by sharp sell offs like the 10% drawdown this summer that came right after passing Dow 14,000 for the first time.
But for now, all of our positions remain in strong short and medium term up trends and we will be following them upwards with trailing stops to lock in these gains because it's always critical to not get complacent when the market is going our way.
Watch your inboxes this week for a new Special Report I've just written.
I've written 5 new Special Reports which are now included as Free Gifts with your guaranteed subscription.
Tthey're packed with good information and insight and you can learn more about them at
http://www.wall-street-sector-selector.com/
The View from 35,000 Feet
This week's move upward was driven by stronger than forecast retail sales and no nasty surprises in the beginning of earnings season. The tech. market went through a nasty gyration downwards on Thursday only to rally again on Friday, and oil hit a record close on Friday of $83.69/bbl. Also, there was an unexpected rise of 1.1% in the PPI, driven mostly by food and energy.
The Week Ahead
Several important reports are coming out this week which will be market movers along with earnings reports that will be coming all week:
Tuesday:
Wells Fargo reports earnings, the first of the big banks and a look at how the financials are faring after the credit crisis.
Wednesday:
JP Morgan Chase reports earnings
Sept. Housing Starts
Fed. Beige Book Report on economic activity
September Housing Starts
Thursday:
Bank of America reports earnings
Leading Economic Indicators
What It All Means
We continue to have a mixed picture as far as news is concerned and are in a very interesting tug of war between the forces of inflation and a slowdown in the economy.
On the one hand, the retail sales report, while considered good, was essentially flat when you remove gasoline and auto sales, and on the other hand, we have a rising Producer Price Index and energy prices that rose 4.1% last month alone.
Of course, Benny and the Feds are watching all of this closely and will use these inputs to decide their course at their Halloween meeting.
Fed watchers continue to play their "what will the Fed do with rates" game, and the picture is decidedly cloudy today with recent news pointing to rates staying steady at the end of October.
However, I expect that this week's reports will help to substantially clear up the picture and give us a more focused view of what the Feds might do.
But, as always, it's important to remember that Wall Street Sector Selector doesn't trade on news, which tends to be a poor predictor of market action, but rather based on our indicators which give us a view ahead for the next 4-8 weeks.
Sector Spotlight
Almost all sectors are in up trends for the month with International and Energy still leading the way. Homebuilders and Real Estate are in the positive column, and as I mentioned last week, I'm watching these two closely. While it's much too early to take a position in these, it's interesting to watch them come out of the negative column after so many months, especially with all of the negative news surrounding these sectors.
Autumn in Bend has been particularly beautiful this year with the changing leaves exploding across our town. In the mountains, golden aspen are sprinkled throughout the conifer sea, and this Saturday morning, Mount Bachelor glistens snowcapped in the sunshine outside our living room window.
Today my young son and I are heading for Twin Lake for a last night out in our R.V. and then I'll winterize and store it for winter this week. That's always the definitive close of summer around our house and something of a melancholy time. Summer is over and we're heading into the darker months, but looking at the snow capped mountain, it's exciting to think of ski season just ahead.
If you compare a human life span of 84 years to the calendar, October would be the start of a person's 64th year. It's a beautiful month, and for many people I know, a beautiful time of life.
My goal with Wall Street Sector Selector is to make all our months and years truly golden, and I greatly appreciate your confidence and trust in that important endeavor.
Have a great weekend.
Your partner in prosperity,
John Nyaradi
Publisher
Wall Street Sector Selector
http://rs6.net/tn.jsp?t=95n8pfcab.0.0.eou954bab.0&ts=S0289&p=http%3A%2F%2Fwww.wall-street-sector-selector.com%2F&id=preview
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