Today's Market
by Dr Invest

We have been riding a wave of hope over the past 4 trading days. Eventhough caution entered the market over the past two days, the over-riding hope is that the FED will stimulate the economy so the positions so bravely taken by speculators will turn into a significant gain.

I don't expect that the FED will oblige wall street with an August stimulus gift. From a technical point of view, we still have a bit more energy in the market that needs to dissapate. Look at the chart below:

What we are seeing on the righ hand side is my prediction for a decline in the market around August 15th, give or take two weeks. If you look at the "head and shoulders" formation on the left, you can see how the hopes for QE-3 elevated hopes before a decline. I expect that the "head and shoulders" formation on the right will have a similar pattern. As GNP growth slows, the market often rises. Called a "bear rally", there is an expectation that the momentary down turn in GNP growth is over and the market will continue an upward trend just around the corner.

This is what we all want... a little down turn... everyone else to sell... and then we buy.... the market rushes upward and we gain 20%. At the end of the year, the applause rises from the investors as they recognize true genius.

This interview with Munson is shocking. Just listen and you will get the general attitude of many wall street investors. And these are the people investing your money. Let me say it like this: "Just stay out of the market!" See the interview here: http://finance.yahoo.com/blogs/breakout/archive/2.html

Tomorrow, Bernanke may stimulate the market... if so, I would be very surprised. Bernanke doesn't have many bullets left and pushing more liquidity into the market (printing money) will only aggravate the coming inflation.

ABOUT GOLD

Gold is a miserable little imp at this moment. It wants to be all grown-up, but year to date it has been a wimpy midget. This doesn't mean that the little midget might suddenly turn into the HULK, but several things need to happen for gold to burst on to the scene once again.

Inflation and a weaker dollar is the first requirement. Because of Europe's woes, the dollar looks unusually strong. Furthermore, many foreign investors are holding dollars because it is, at this time, the most stable currency.

Gold has declined and presently is in a side-ways pattern, some call it consolidation. Either gold will regain its footing or see a strong move downward. I think that when we see a strengthening of world economies, inflation will inflict its aweful punishment on economies who failed to see the power of its vengence.

Gold will be a good investment, then. (When inflation rises or the dollar loses value.) In the last six months gold has lost 7.33%. Not such a good return for 2012. Remember rule one, "Don't lose money!" I'm not in love with any company, nor any commodity; I'm only in love with winning investments.

EXERCISE CAUTION

This is the time to exercise caution. Many voices in the investment community are warning investors to "Watch-out!". It  would be wise to take heed. Stick to the investment plan I gave you in May. (Go back and read the May blog.) We will worry about investing in stocks at the end of October. The market could rise... Bernanke could stimulate and bring a two or three month bull market. The problem is that no one can be sure when the market will suddenly collapse; and when it does, it collapses suddenly and without warning. Within a week, all your gains for 2012 can be erased.

Though I can't be sure, it seems like the left part of a "Head and Shoulders" pattern has formed. The hope for stimulus has driven up the left shoulder and when that collapses, investors could feel a world of hurt. Still, Bernanke could stimulate the economy in September. These kind of efforts only create an artificial market and when stimulus is removed or can no longer be sustained, the pain will be terrible. Be wise and patient, wait for the right opportunities and keep your STOP-SELL in place on all your investments.

(note: the above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

This morning I stared at my computer screen in disbelief as I saw the stock futures up over 100 points. Yesterday's market climb was due to the anticipation that the Federal Reserve must stimulate the economy because it is falling into a recession. This morning, European Central Bank President Mario Draghi pledged to do whatever was necessary to protect the euro zone from collapse, including fighting unreasonably high government borrowing costs.

The bold moves by government banks are designed to draw your investments into a faltering world economy. Explain to me how Draghi is goining to fight unreasonably high government borrowing cost? And what is "unreasonably high"? Are you ready to lend Greece or Spain your personal money? That is not likely when these countries are on the verge of bankruptcy and they are already talking about offering bond holders only half of the money they invested in government bonds. I don't think anyone is stupid enough to lend these countries money. Still, they continue to get money from bond holders and recent reports from Greece say that they have not met their promises to reduce government spending.

Although this idea "that people will stop buying bonds until the yeild increases" has been floated, it seems we are moving closer and closer to the collapse of bonds as governments fail to meet their financial obligations. Governments desperately need people to take their money out of their savings and lend it to them and they are immoral enough to manipulate markets so buying bonds seem desireable. Still, at some point, people will get smarter and see that the WIZARD OF OZ has no real power other than a loud speaker and a few special effects. (I'm talking about the government banks "bully pulpit" through the news media, to influence people by making promises that they cannot keep.)

Reuters Reported:

"Finally the markets have forced the ECB and the euro group leaders to begin to make statements that the market really wants to hear," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

Hopes that the Federal Reserve will boost efforts to stimulate a flagging economy, maybe with a decision to do so as early as at its rate-setting meeting next week, soothed concerns about the economy and offset the impact of what investors describe as a "mixed" corporate earnings season.

Let me interpret for you: Government banks have made promises that if large investment firms will take people's money and lend it to failing and bankrupt governments, they will take the tax payer's money to prop up the failing government's loans so it appears that the economy is vibrant to the people.

Denying that there are any economic problems at all, government banks have created a circle of lies that put the "people's money" at risk. Obama care will tax the sale of real estate at 3.8% and raise capital gains to 28% and this on top of an already 20% income tax. It is a sad fact that a collapsing federal government must TAKE money from those who have worked the hardest and have been the most disciplined in their investments.

Conclusion

You will see stocks climb momentarily on the speculation that the FED and the ECB can and will do something to stimulate the economy. Even if they stimulate, most economist expect only a short lived effect on the market. As an investor, I can't control the government's taxing or stimulus, but I can control how I invest. Remain true to your investment plan and protect yourself from unforseen market downturns.

(note: The above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

Here I sit, waiting! There is really nothing else that I can do. There are no "shining lights" in the investment world. One could take an investment position by purchasing inverse ETFs for the S&P or DOW indexes, but these kind of positions can be very risky especially if Bernanke unexpectedly intiated a QE-3.

If you have been following my blog since May, you will have seen how I have positioned 1/3 of my portfolio in bond investments using TIP and BND ETFs. The gains from this position now stand at 2.15% with and expectation of 6% to 8% by the end of 2012.

Below is the DEATH CROSS where the market seems to be heading. The DEATH CROSS is where the 50 day moving average falls below the 200 day moving average and indicates a possible trending down for the coming months. It also often indicates the begining of a recession. Although we are still above the 200 day moving average, the 50 day moving average is only two or three weeks from falling below the 200 day moving average. (read my previous blog for more details)




At this time, keep the faith. Make sure you limit your losses by using a STOP-SELL on all your investments. Remember rule one, "Never lose money!" and rule two, "Remember rule one!".

(The above information is for entertainment purposes only and not to used a investment advice.)

Weekend Report
by Dr Invest


I once read the the Bible "Look to the sky and you are able to determine that there is bad weather." I was raised on a farm and as a youth, spent time in the fields. Though accurate weather was unheard of, we could look at the sky and see weather trouble brewing. And if we were attentive, we would have only a few hours to prepare the fields for the coming weather event.

The stock market is similar in many ways. Eventhough you know something is going to happen, you don't know if it will be a big, medium, or small event. To make matters worse, when you as others about the possibility of an event, there are many opinions that range from "Don't worry about it!" to "The sky is falling!"

Today, we have computerized weather models, more reporting stations, clearly defined models, but still can't guarantee 100% accuracy predicting the weather. The stock market follows a simular predictive challenge.

Look at my chart below:

I used the chart to predict the collapse of the market in the first part of May. What I couldn't predict is how the market would respond to Benanke's suggestion of a QE-3 and the market falling all over theirselves to buy stocks in anticipation of the coming stimulus.

I see another HEAD AND SHOULDERS pattern developing that should fully work it's self out by August 15th, give or take two weeks. Unless Bernanke does another twist or QE-3, we will likely see the market moving downward at the end of the head and shoulders pattern.

Look at another of my charts below:



DEATH CROSS

When the 50 day moving average falls below the 200 day moving average, it is a signal for long-term downtrend. This signal is called the DEATH CROSS or GOLDEN CROSS.

It is a death cross if you continue to invest in stocks which are destined to decline in price. It is a golden cross if you short stocks. Now shorting is "betting the stock will go down". For example an inverse ETF can be purchased for the DOW or S&P indexes. Should the market slide into a decline, you would make money.

I personally stay away from such trades because experience has told me that it is easier for a market to turn up than turn down. For example: There is the threat of war from Iran and Korea, oil prices edge upward toward $200 per barrel as speculators believe war is eminent. Oops! Hillary and Komeni kiss and promise years of endearing love and affection for one another's countries. The next day, the price of oil is $40 per barrel. Speaking of barrels, you are left holding the barrel.

Many people to trade inverse positions and inverse positions can be a great way to hedge your investment, but I like simple straight on trades that make money.

CONCLUSION

There really is no need to change any of your strategies at this time. Be out of stocks unless you have stocks that are performing. Be into BOND ETFS with 1/3 of your portfolio. Divide that bond postion into equal investments into TIP and BND. (Go back and read May's blog.) As of Friday, our portfolio is up 2.09% and we expect a 6% to 8% return on our BOND ETF position for 2012.

Keep a STOP-SELL on ALL your investments. This market is nothing to toy with. You can lose money faster than you can go to each account and sell your positions. Let the STOP-SELL automatically sell the positions for you. Set the Stop-Sell at the first of each month and set the Stop-sell for your Bond Positions at 3% below the closing price of the ETF for that month.

There may be buying opportunities for GOLD and for STOCKS later, but I would stay away from these kind of investments until you see some indication of an uptrend.

(Note: The above article is sole for entertainment purpose and not to be used a investment advice.)

Today's Market
by Dr Invest

Promises, Promises! Once again, the market rises upon the hopes that Bernanke MUST stimulate the market. Wall Street just can't get this idea out of their head. Billions will be lost on the gamble that Bernanke must stimulate the market in August. Investment firms are so desperate to show gains, at the slightest indication of positive news, money rushes into the market. Since the middle of April, Wall Street has been calling upon Bernanke to stimulate the market. Each month the market has risen upon the speculation that Bernanke would stimulate the market and then the market would fall with the loss of billions of investor dollars.

This call for stimulus repeats itself each month with the total market buying billions of dollars worth of stocks in anticipation of a significant rise in the value of stocks. This stimulus may come just before the election, but only with there is a significant decline in the market.

Getting A World-view

The problem is that there are significant signs of a world-wide recession. I'm being kind here by not using the word DEPRESSION, but even mainstream economist are now admitting that financial crisis could be a foot. 

According to CEO and Chief Global Strategist of Euro Pacific Capital Peter Schiff, the U.S. economy is heading for an economic crash that will make 2008 look like a walk in the park. Stimulus programs can delay this day of reckoning, but only for so long and only at the expense of making the eventual meltdown much, much worse.   Please get the full story at: http://finance.yahoo.com/blogs/breakout/america-heading-towards-collapse-worse-2008-europe-says-155504860.html

DEATH CROSS

A death cross is when the 50 day moving average moves BELOW the 200 day moving average. This isn't always the sign of a BEAR MARKET, but most of the time it marks the begining of a downturn. I would expect this downturn in August or September. We have had an unsually difficult season with losses begining early in the summmer and the losses falling below the 30 year seasonal trend chart. The "death cross" or "golden cross" is not something to toy with and if you are in stocks or investments tied to stocks, you will need to be concerned.

For me, I'm not utilizing a BUY AND HOLD method so I'm not greatly concerned. But if the DEATH CROSS is indicating a downturn in stocks, you could see losses of 30 to 40%.


The green line represents the 50 day moving average and the trajectory seems to be headed toward a cross. My best guess is that the Death Cross will come somewhere around the middle of August give or take two weeks. Still, you need to know the term: DEATH CROSS. And you need to know that it indicates a potential downtrend in the near future.

Calming Thoughts

Our investment strategy is not going to be changed by temporary moves in the market. We have made careful investments for our BOND PORTFOLIO with TIP and BND exchange traded funds. We have determined that if our investment falls below 3% of the closing price, set on the first of each month, the STOP-SELL will be activated. Stocks will be considered, but only after October 29th; and then, only if the market is in an uptrend.

As in every investment, rule one: don't lose money; rule two: remember rule one. I'll never forget some advice given by Lousie Yamada, "Its better to be out of the market wishing you were in, than to be in the market wishing you were out." Keep to the plan and be patient where you are the most likely to make money. Be patient, your disciplined investing will reward you and protect your portfolio.

(Note: the above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

Do you remember what I said in my WEEKEND REPORT? Today, the market lost 1/4 of its gains from Friday. Over the weekend, a financial raido adviser lamented: "How foolish, all you who got out of the market, you just lost the gains of the market rising 200 points. Listen, the joke was on him. Preying upon the fear of investors, his only desire was to make profit by selling mutual funds. His perspective was entirely wrong. This is not the ordinary market, nor will it be the ordinary market until the debt is worked out of the market.

We are in for a long-haul of troubling financial markets. It is not, just "dollar cost average" and "buy and hold". This market has already killed a number of portfolios with that method.  The method, by the way, does work but just not at this time. We have a lost decade of investing and are well on our way toward another lost decade of investment short-fall.
GOLD

Gold hasn't really shown promise over the past year. And it appears that gold is only weeks away from either a downturn or an upturn. See the following articles on investment in GOLD. http://www.themarkettrendforecast.com/forecasts/gold-still-at-risk-of-a-large-downward-move-before-the-rally/

http://www.themarkettrendforecast.com/forecasts/

What is clear is that until GOLD breaks-out or breaks-downward, it is really a very poor investment. If you are presently holding gold investments, I would not sell until I saw a new trend set. You have already lost money holding gold in 2012, but gold could trend upward as well as trend downward at this time. When the trend is established, you will know if it is time to sell your gold or to buy more. If you are not holding gold at this time, don't buy it.

STOCKS

Stay away! If you presently own stocks, place a stop-sell on your stocks. If your stocks are performing, keep them!  But as always, sell the stocks that are losing value. Expect stocks to continue to decline until the end of October. We will revisit investment opportunities in stocks at the end of October.

DIVIDEND STOCKS
I suggest that you buy DVY, an ETF, when stocks begin to rise once again. While you could see dividends of 6% or more in dividend stocks, they can fall 15%, 30%, or more if stocks collapse. Eventhough you gain 6%, you could still have a significant loss. So don't buy DVY until stocks strengthen.

BONDS

Our investment into BONDS (TIP and BND) is performing well. As of today, the TIP and BND position with 1/3 of my portfolio had grown 1.91%. I am expecting a 6% to 8% return by the end of 2012.

REAL ESTATE

Reits have done remarkably well and are part of the IVY PORTFOLIO METHOD. I own some rental property, but with real estate each market is different. Our market is hot and the ROI is positive, eventhough tax aprasials have declined over the past few years. (ROI=return on investment)

So although real estate values are not growing, the cost of renting is growing, providing an investor with positive cash flow.

CONCLUSION

Hold on to your present BOND position in TIP and BND. I place a 3% stop-sell behind the closing price at the first of each month. I guess-i-mate that on the first of August, my bond position will have returned 2%. My potential loss will only be 1% if the stop-sell is triggered.  Though a big assumption, if my bond position had returned 3% by the beginning of August and if my 3% stop-loss was triggered, I would not have a loss.   What is better is when you have a 5 or 6% return, even if the stop-loss is triggered, you still gain 3 or 4%.

No one can predict the market, like a cork, you only float on top of where the market is headed. Unlike a cork, you can decide when you want to get out of the market.

(note: the above information is for entertainment purposes only and not for investment advice.)

Weekend Report

by Dr Invest

Do what? The Dow climbed how many points? Uhh 203 points? Really! Duh oh! There are a lot of things I could predict, but not that the DOW would go up 1.62%.

Stupidity defies intelligence, statistics show that recession is preceded by bear rallies. What is it in we humans that remains hopeful that the winds of fortune will blow our way even though all the facts point toward financial calamity?



Many books have been written on the psychology of the trader. Deep inside there is a confidence that though others may fail, I will succeed. So we keep blindly taking chances that can only result in further losses in our portfolio.

Keeping the Faith

Repetition is the price of learning. I am using the IVY PORTFOLIO METHOD. Go back and read my blog beginning in MAY. I am also utilizing SEASONAL CHARTS. There are certain investments that do better at different times of the year than at other times. I look at thirty year charts covering a 12 month period. I don't invest in "heating oil" if it is summertime; instead, I wait until the fall when the demand for "heating oil" returns. The demand for "heating oil" is shown in SEASONAL CHARTS.

Most gains are made from the end of October until the end of April. Over previous 30 years, the average gain from the DOW has been around 12%. This takes into account the bad seasons of the year as well as the good seasons and also takes into account both the good stock performances and poor stock performances. 12% is the average of the losses and gains.

But what would happen if you were invested in the DOW at only the season in which the DOW saw gains? Breakpoint Trades gives us some statistics. http://blog.breakpointtrades.com/2012/03/sell-in-may-and-go-away-statistics.html  Some of the traditional investment advisers claim it makes no difference, but when you see these statistics the result of the strategy is evident.



Remarkably, what the chart above shows is that you would have made more using the BUY at the 1s of November and hold until the end of April, than you would have made even with the BUY AND HOLD METHOD.

So the Financial Adviser is just WRONG! As we move toward the end of October, we want to carefully look at the Stock Market to determine if we can move into a STOCK POSITION. I believe that Bernanke will has stimulated the economy before the presidential election and that some return can be made.

The fall in the weak market that I had seen early in 2012 will not likely happen until 2013. So I will stay away from stocks for now and keep my BOND PORTFOLIO containing TIP and BND.

(Note: the above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

About Gold

Some people are still asking about gold. Gold is a commodity and only warrants one's investment if it is MAKING MONEY. Look at the chart below:

What this chart is telling me is that GOLD would have been a poor investment over the past six months. And over the past year 1.74% return is still poor. It really make no difference that Gold gained 800% two years ago, at this moment it is a loser.

The only reason to invest in a commodity is if it provides a reasonable return. Gold is not providing much of a return.


Reason to Hope

Let's look at the one year chart for Gold. We do have a technical that looks like a bull penant. This would normally indicate a nearby uptrend. The problem here is the dollar valuation. The dollar appears STRONG, when compared to other currency. It doesn't appear that the dollar will weaken until the Euro regains some strength against the dollar. A good ole recession will take the dollar lower, but with continued government intervention it is unclear about the near-term outcome.


When we look at the 6 month gold chart, we see a clear side-ways movement in gold which means a possible break-out (which is my prediciton) or a trending downward. The problem is that we don't know how long this consolidation trend will last.

We could see a break-out in September or August, but anticipating FED intervention just before the election, I think that gold prices will not break-out until 2013.

This still begs the question, should I invest in gold now? As an investor, I would not make an investment in anything that is stagnant or could move lower. Each investor has a different investment style, but for me there is no reason to be invested in gold until the dynamics of the market change so Gold can move higher.

For now, I am satisfied with my position in TIP and BND using the Ivy Portfolio Method. My gains have already exceeded the return on gold for the year and I have been invested in TIP and BND since the first part of May. Gold could break-out and then would be a viable option as an investment. Until then, I'm watching.

Today's Market
by Dr Invest

On his hot July day, deep in the heart of Texas, there is an investor with little on his mind to worry about. Although he completely missed-out 12% gains in early 2012, he is not bitter because he also missed out on the 12% losses as well. This investor knows that the mantra of the finanical advisers is "Keep buying and buying. Stocks are cheap. Your'e gonna make a bundle. You can't time the market. If you were fortunate enough to buy in January using this ideology, you now have broken even. If you were stupid enough to buy in the first part of April, you now are smarting with at 12% loss.

To make matters worse, John Hussman is calling for market decline of 48%. If he is right, the "buy and hold investor" only has another 36% to loose. For the first time, CNBC ran an article by Roubini that highlighted the possibilities of a real recession. http://finance.yahoo.com/news/roubini-perfect-storm-unfolding-now-104907590.html  Roubini predicted in May, that four things would come together to create the perfect storm for the global community in 2013. We are well on the way toward Roubini's predictions.

Still, I'm sipping my iced tea and taking note that my investment into a BOND ETFs with 1/3 of my portfolio is slowly climbing. Today TIP and BND has gained 1.59%. If I see a 6% gain by the end of 2012, I will be delighted. An 8% gain will bring tears to my eyes. You can see, it doesn't take much to please me. The higher the gain, the HIGHER THE RISK. In a predictable market, you could see some remarkable gains...with some remarkable risks; but in an unpredictable market the risks out weight the gains. Make no mistake, there are professionals who have lost A LOT OF MONEY in this current market. That is a risk I am just unwilling to take.

We could still see a SUCKER'S BULL MARKET for three or four months, but the prevailing weakness in the market will eventually pull the market into a decline. If it is not Greece, it is Spain; if not Spain, it is Italy; if not Italy, it is Ireland; the canidates for finanical collapse are lined up to take their turns at stimulus. Combine this with financial weakness in the U.S. and China, and the wise investor needs to exercise extreme caution.

I think 10,600 on the DOW is possible, if not likely. This would be a revisit to the lows of September of 2011. The deal-breaker that could stop the drop is Bernanke. What he will do in an election year is questionable but as I have said before, he will likely stimulate the economy in the months before the presidient. This should give only a few months of an uptrend but long enough for a presidential canidate to be chosen.

For now, I'm going to limit my losses and enjoy my iced tea. If history is an indicator of things to come, the next few months ahead are going to get a lot hotter.

(Note: the above article is for entertainment purposes only and not to be used as investment advice.)

Weekend Report
by Dr Invest

So here we sit, the market moving up and down. The latest reports of a QE-3 are once again growing. So the story goes, "With the reports of the world economy so grim, the FED must stimulate the economy by the first of August." The mantra is "Don't worry, the goverment is going to keep your investments secure. Invest liberally and ride the ups and downs. Since you can't time the market, staying in the market will even out the ups and downs; in the long-run you will make the most money."

This would be a great way to invest if it had proven profitable over the past 12 years. Sorry, it hasn't and it won't. Borrowing our way to prosperity has a cost. Imagine for a moment that you earn $30K per year. You borrow $150K for your new house. (That's $628 per mo and another $250 per mo in property taxes.)  So you will pay $10,636 per year for 30 years. You have $19,364 live on. You need two cars, the latest models; you will pay another $12K per year over the next six years. That leaves you with $7,364. You spend another $5,400 on food and electricity; that means $1,964 remains in your annual budget. Gasoline for your cars is another $2,400 per year; that means you owe $436 per year. This is the fundamental problem with individuals and with governments. You have committed your money for years into the future to pay for things you enjoy now. What is worse is that you OWE and additional $436 than you earn each year. You reason, that is only $36 per month that I am not able to pay; I'll find some way to pay that $36... perhaps I'll get a raise and be able to pay that extra $436 at the end of the year.

I think you see the problem here. When the $436 doesn't materialize, you put it on your credit card. After a number of years, the credit card reaches it's debt limit. Now you have additional debt added to the original debt. The credit card company begins to make demands that you pay them, but you are still only making $30,000 per year. Until your debts are paid, you can't buy more. If you don't buy more, companies can't make a profit, if companies can make a profit, the stock market either declines or grows stagnant. This is the problem with our economy over the past 12 years.

Imagine that UNCLE SAM hires you for three months. You get the salary and your personal income is stimulated for three months, but when the contract ends so does the additional income. Because you still owe on your credit card and you are going into debt at $436 per year, the STIMULUS has hardly impacted your financial condition.

The answer is here is DON'T GET INTO DEBT! If you are in debt, GET OUT OF DEBT! Sell the house; sell the car; start over. Rent an apartment; buy a used car. This kind of austerity hurts for a while, but allows you to make financial gains that are beneficial to your future. You will not be able to borrow your way out of debt. Although you may one day get a salary increase, the increased debt may exceed the salary increase you expect.

OUR BOND INVESTMENT

We have an experimental portfolio of $10,000 and have invested 1/3 of our portfolio into two BOND ETFs, TIP and BND. The investment of $3,333 was made over a three month period with $1,111 invested in TIP and BND each month. As of Friday, the total portfolio gain was 1.21%. The projected return for this investment position could range from 4% to 8%. I have also placed a stop-sell at 3% below the purchase price. That stop-sell will be reset to 3% below the closing price of TIP and BND at the beginning of each month.

That's about it! Be patient. And read John Hussman's latest article at Hussman Funds. http://hussman.net/wmc/wmc120702.htm Please consider EVERYTHING that Hussman is implying. I agree that we will see a bear rally with a final collapse that could take the market down 45%. Be cautious and keep STOP-SELLS on all your investments. Be quick to get out of the market, you can always buy back in.

(note: the above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

Investment time again. See the WEEKEND REPORT. I purchase 5 shares of  TIP at $114.42 and 6 shares of BND at $84.23. This means that 1/3 of our theoretical portfolio of $10,000 has been invested in BONDS. ($3,333.33 is our BOND position.) As of today, the total BOND portfolio has gained .80%.

To learn the details of the IVY PORTFOLIO METHOD, start reading all of May's blog. A brief summary can be found just before this article in the WEEKEND REPORT.

As with stocks, you need to set a STOP-SELL on your purchase. I set my STOP-SELL at 3% below the purchase price. (Multiply the purchase price by .03%. Then subtract the SUM from the purchase price.) I purchased TIP for $114.42. 114.42 X .03= 3.4326   Now subtract the SUM of 3.43 from the PURCHASE PRICE of $114.42. Your STOP-SELL will be set at $110.99 for all 15 shares of the TIP ETF.

You will follow this same method is calculating the STOP-SELL for BND. Don't forget this step. You want to have a plan to enter the investment purchase as well as a plan to leave the investment purchase. Friday, employment figures will come out. Everyone believes that the report will be BAD! The only hope is that the figures are not too bad. This will be a short week, so investors will be sensitive about how they have positioned theirselves for the upcoming bad news.

BOND investments could remain choppy through July, with some rises and some falls in price. August and September will likely bring the best climate for BONDS to increase in value. Don't be impatient, wait for the performance that comes from BONDS. Bonds will NOT quickly rise or fall. A 6% return by the end of the year would be commendable and beat the interest from a Certificate of Deposit at a bank.

BOND BUBBLE

You must always be ALERT that even BONDS can reverse their gains. This is why a STOP-SELL is of great importance to your investment strategy. Once you see a 5% return on your BONDS, we will move the STOP-SELL closer to the daily closing price. This will help you maximize your return from your BOND investment. Bonds may stablize and the STOP-SELL may never be used, but always have the STOP-SELL IN PLACE.

With smaller downward moves in the market, BONDS will continue to grow in price. HOWEVER, when a serious recession/depression arises, both STOCKS and BONDS decrease until the OVERVALUED  condition is erased from the market. So BONDS are not always SAFE and can be equally as volatile as STOCKS. There have been suggestions of a BOND BUBBLE. This means that too many people have purchased bonds at very low yeilds, when inflation begins to push up the yeild on BONDS, people will want to sell their worthless bonds to buy the bonds that bring a higher yeild. If you are holding a BOND POSITION when people begin selling their bonds, the price of bonds will begin to decline dramatically. Your STOP-SELL should limit your losses if this occurs.

(Note: the above article is for entertainment purposes only and not to be used as investment advice.)

Weekend Report
by Dr Invest

We have been using the Ivy Portfolio Method, starting our investment in May. Seasonal charts show that in May, stock prices decline and bond prices rise.  We have used a theoretical $10,000 portfolio, dividing the $10,000 into three parts. These three parts are CASH, STOCKS, and BONDS with $3,333.33 deposited into each of these categories. (See the blog for May for details)

To further reduce risk we divided the BOND category into three parts, with each part represented by $1,111.11. Our BOND investment was made into two BOND EXCHANGE TRADED FUNDS: BND and TIP. On May 2nd, $555.55 was invested into BND and $555.55 was invested into TIP. The rule for the Ivy Portfolio Method is that if the price of the ETF remains above the 10 month SIMPLE MOVING AVERAGE on the first of each month, you are to continue investing into the ETF.

The price of our investment into BND and TIP did remain above the 10 month SMA on June 1st, so we purchased another $555.55 of BND and another $555.55 of TIP. Since the price of BND and TIP will remain above the 10 month SMA on July 1st, we will purchase another $555.55 of BND and another $555.55 of TIP.

Note: the red-line is the 10 month SMA or 217 day SMA. The price of TIP is clearly above the SMA and indicating that a purchase can be made.

Tomorrow, we will have 1/3 of our total theorectical portfolio of $10,000 invested into BOND ETFs. Between the blend of BND and TIP BOND ETFs, a total of $3,333.33 will be invested. This is what is called, TAKING A POSITION. One third of our portfolio will be positioned to take advantage of a downward movement of the market in August and September.

Will the market decline in August and September? There is really no way to know, but our SEASONAL CHART shows that on a 30 year average, the market has declined over those months. Buying a POSITION in Bond ETFs will place us in the market when BONDS are most favorable to rise.

STOP-SELL: I will place a stop-sell at 3% below the purchase price of BND and TIP. This is done by taking the PURCHASE PRICE of the ETF and multiplying by .03. For example:

TIP is purchased for $119.70. Multiply $119.70 * .03 = 3.591. Now subtract $3.59 from the purchase price of $119.70. Your STOP-SELL will be SET AT $116.11. If TIP falls to $119.70, it will sell. If this is the first STOP-SELL you have ever SET, call your brokerage help line and they will assist you in placing your first STOP-SELL.

CURRENT PORTFOLIO PERFORMANCE: After two months the total portfolio performance for BND and TIP has been .03%. I expect that July will keep a sideways movement with a decline the market in August through September, giving BONDS a boost and a gain in our investment position. Most important, keep your STOP-SELL updated.

OVERALL MARKET OUTLOOK

John Hussman gives an excellent overview of the present market outlook. Please read carefully.
http://www.hussman.net/wmc/wmc120625.htm

GOLD

Let's talk about STOCK PATTERNS. Here is what is commonly called a FALLING WEDGE which typically indicate a coming uptrend.


Now let's look at our gold prices in chart form, looking for the FALLING WEDGE PATTERN.

I would speculate that Gold prices could break upward in the next 20 to 40 days. It seems that this upturn in Gold prices will coincide with the expected downturn of stocks in August to September.

(note: The above information is for entertainment purposes only and not to be used as investment advice.)