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.)