Weekend Report
by Dr Invest


The past week has been "Breath Taking" with the rise and fall of fortunes in the Stock Market. A 275 point fall in the DOW over one day is a significant downturn, but some of the great falls in the DOW have exceeded 700 points in only a day. Typically, a sharp one day downturn is followed by an upswing the next trading day. I would expect an upturn, however short, on Monday; but continued expectation of bad news may curb any possible rebound.

The market itself is in a SEASONAL DOWNTREND; and when you add a tepid economy here in the U.S. coupled with a faltering world economy, an upturn in stocks right now doesn't look very favorable. There will be "bold traders" that will try to play this market, and they will either lose a lot of money or gain a lot of money. These kind of "stock traders" do not stay in the market for long. In spite of spectacular gains, there are also spectacular losses. Jesse Livermore, possibly one of the greatest traders in his time, gained fortunes and lost fortunes. At the end of his career, he had lost everything, saving a few million in a family trust. The crowning response to his failing career as a "stock trader" was to extinguish his own life.

At this moment, the market "dicey". In other words, stay away from stocks right now. The trend is not following the seasonal chart for the market at this time. The market will tend follow the seasonal chart and typically the real downturn doesn't take place until August or September. I think we can already see that this has not been an ordinary year and many are thinking that the best of 2012 is behind us.

I think the bubble has burst for the moment and that many investors are coming to the recognition that the bull run of 2012 is over. Monday will determine whether investors are moving toward panic or ready to take-on more risk because in their exhuberance they believe the present lows are buy opportunies. I am in the panic camp, my stocks sold in April when they hit their stop-sell.

My Purchase on June 1st

I recorded on this blog, my purchase of TIP and BND exchange traded funds this past Friday. My original investment into TIP and BND of $1,111 in May, had grown 1.32%. I purchased another $1,111 of TIP and BND that grew 39% on Friday. As of the closing on Friday, TIP and BND had a total of $2,222 invested into the positions with a total gain of 76%. The goal is to see TIP and BND gain a total of 2% by the first of July, when a final $1,111 will be invested into TIP and BND.

We will wait until the end of October to see if there are viable opportunities to invest into stocks at that time. Using a $10,000 portfolio, we have set aside $3,333 for investment into stocks, but we know that NOW IS NOT THE TIME TO INVEST INTO STOCKS.

About Gold

I see gold coming alive once again, but not enough to feel comfortable in investing into the commodity. Below is the recent chart on gold prices. Until gold breaks above $1740 per ounce, an investor would only be speculating that gold would continue a long term uptrend.



Because the downtrend in stocks is going to continue in the near future, gold could continue to rise in price. A speculator might buy in at $1,660 and hope that gold climbs to $1,900 again. If you chose to practice this kind of speculation, limit your losses with a stop-sell. And be prepared to lose some money.

If you just like the idea of having gold, then buy it and walk away. Come back in two or three years to check your gains or losses.

Other Speculation

During a downtrend, some people choose to buy INVERSE EFTs.  You can look at the chart below. Here is my view: Don't speculate! More times than not, your speculation ends up in a reversal of fortunes. That mean that the market gets your fortune.

UltraShort (2x) Sector:

ETF Name	Ticker	Benchmark Index
UltraShort Basic Materials	SMN	Dow Jones U.S. Basic Materials
UltraShort Consumer Goods	SZK	Dow Jones U.S. Consumer Goods
UltraShort Consumer Services	SCC	Dow Jones U.S. Consumer Services
UltraShort Financials	SKF	Dow Jones U.S. Financials
UltraShort Health Care	RXD	Dow Jones U.S. Health Care
UltraShort Industrials	SIJ	Dow Jones U.S. Industrials
UltraShort Real Estate	SRS	Dow Jones U.S. Real Estate
UltraShort Semiconductors	SSG	Dow Jones U.S. Semiconductors
UltraShort Oil & Gas (Read this first)	DUG	Dow Jones U.S. Oil & Gas
UltraShort Technology	REW	Dow Jones U.S. Technology
UltraShort Utilities	SDP	Dow Jones U.S. Utilities

Never the less, if you have plenty money to burn, you might speculate by "betting that the market will go down". If you get weak in the knees and nausea comes easily, I would recommend staying away from these kinds of investments.

Early in my stock trading career, I invested in what was the "hottest stock". I imagined getting a 20%, 30%, even 40% return. I could envision myself announcing to my wife,  "Dear, I just made $6,000 today. Let's pack our bags and head for Rome, I'll make another $6,000 from my telephone as we are flying there!" Any real investor knows that the stock market doesn't provide these kind of returns.

There is no sicker feeling than investing into a stock, then seeing it decline $500 the first day, then another $1,200 the next day. All the while, you hope that the economic winds will bring a reversal and your stock will begin to climb again; but after a month or two of losses, you finally conceed your loss and sell, happy that you only lost $6,000. Did I ever tell you about the time I invested into GE? It seemed like a good idea at the time. After several months of losses, I finally sold the DOG. I expected to see GE suddenly turn upward, but GE continued its march downward until I thanked God that I had such a small loss... as opposed to what I could have lost.

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