Today's Market
by Dr Invest


If you don't understand the "Head & Shoulders" pattern, please read the past three blogs. This pattern that is forming may mean nothing, but for me there is a measured caution for further investing into the market. Furthermore, the unfolding pattern means you need to limit risk by having the appropriate STOP-SELLS in place.

There are four more trading days before the end of April. For the Head & Shoulders pattern to unfold, the DOW would need to remain around 13,000 with a slowly declining market from 13,000 within the next 10 to 20 days.

Threre is little to report today, the market rose roughly 1/2% which was expected. The DOW could rise again tomorrow because of the enthusiasm over APPLE. Likely, investors will exercise more level heads and the market will continue a slow decline as we move toward May.

Tonight I enjoyed PBS programs: "The Crash of 1929"(American Experience) and "Money, Power, and Wall Street" (Frontline). You can find these on HULU.COM and I think that they are a must view for every investor. You need to fully understand the slimy underworld of Government and Financial Markets. The stock market is not a "friendly place". There is a world out there that wants to take ALL YOUR MONEY and scarelessly could care less that they told you a lie to take it. Listen carefully and read between the lines.

Many generations... before you.... lost their life savings in the financial markets. The markets continued and Wall Street executives still got their bonuses, but the hard-working masses paid the price for the financial markets excesses.

Today, we will pay for the bail-outs, the market stimuluses, and the increased government spending. How do you get even? This is the time to exercise caution, reduce risk, and wait for the optimal time to invest.

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

Today's Market
by Dr Invest


Someone asked, "Is it time for the axe to fall?" As usual, we have a host of analysts suggesting that "Now is the time to buy". Oddly enough, with all this talk about buying on a "pull back", we don't see a rise in volume in stocks purchased, instead; we see a rise in the volume of stocks sold. What this tells me is that investors are taking profits and waiting.

So, where is the market going? As said in a previous post, only a fool would predict where he thinks the market is going. As a point of humor, when a reporter asked the famous Jesse Livermore what the market was going to do today, he said, "It's going to go up and it's going to go down". That is a sure answer that encompasses the movement of the market in a day.

Review of the "Head & Shoulders" Pattern

On Thursday, I pointed out what appeared to me as a "Head and Shoulders" pattern. I have been watching that pattern unfold. It takes time for the pattern to mature and we are watching the right shoulder as it continues make a clear shape. Today's FALL IN THE MARKET was expected if the shoulder was to continue to take shape. The left shoulder is somewhat in-distinct, so it is hard to predict accurately where the shoulder started. It if take the smaller shoulder on the left, the right shoulder will take at least until the end of the week to reveal itself. To form correctly, we will need to see some more days of the market going back up and the market going back down.

We could be in this pattern for 10 more days if the right shoulder's shape progresses to the shape of the small shoulder on the left. On the other hand, the right shoulder might need 20 days more to progress if the left shoulder is actually larger. Take a look at the graph below:

We can see the begining of the left shoulder, being fully matured after 20 days. If this is indeed a "Head and Shoulders" pattern, we should see the right shoulder fully formed around 20 days or at the end of April. It is possible that the "Head and Shoulders" pattern will break and no longer be a threat, but the better part of wisdom says, "Take warning!".

If you are going to broker your own stocks, you need to be familiar with this pattern, understanding that it is simply a flag of warning. When you see it, move your STOP-SELL closer to the current closing price of the stock.

• If I had gained 12% since January in a particular stock, I would move my STOP-SELL from 5% to 3% under the closing price.
• In this case, the right shoulder is going to peak before turning down. I've already identified the pattern three days ago and I am expecting a sell-off.

Now, I did have stock that sold when the market dropped off the head. So in my case, the STOP-SELL was close enough to protect me from the right shoulder. I won't buy back into the market until I see what the next few weeks bring.

Tomorrow the Fed will meet and Bernanke will make promises that any dramatic changes will be covered by a new Quantitive Easing. This will be a promise, but not an action that the Fed will take. The promise will bolster the market for a few days and the weakness in the world market will creep back to affect the U.S. market. Don't expect a return to market strength.

As for now, I remain patient until buying opportunities resume... likely in October. Those who want to short stocks are welcome to do so, but that is not my game.

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

Today's Market
by Dr Invest

Make no mistake, governments manipulate the markets. Sometimes this manipulation helps the people, but all of the time the manipulation helps the government and the financial institutions. I mentioned in a recent blog, that the robust life in the market was due to manipulation by the Federal Reserve. Look at my diagram below:

Using a grocer called, "Whole Foods", we can see that they had a gross income of 1 billion. With the stimulus program, QE-1, QE-2, and twist, 25% more liquidity is added to the market. No, the fed didn't print more money, but there is money movement or availability to the banks that wasn't there before. The result is just what we have seen, increases in the cost of commodities. Over the past months automobile gas, food, and materials have increased.

Whole Foods must transfer the cost of increased transportation and food costs to their retail consumers. That 25% stimulus by the government, now has to be paid for in the form of inflation to the consumer. So look what happens to the GROSS INCOME and NET PROFITS of Whole Foods. That's right, everything rises 25%. The government gets a glowing report from Whole Foods of increased income and profits. Wall Street goes mad buying into the rising Whole Foods stock and urging consumers to invest all their money into Whole Foods stock. All the time they know that the way things appear is only "smoke and mirrors" and within months the economy will sink again.

(note: Whole Foods and figures used herein represent no actual company or its gross profits.)

Think back to Bernanke's warning of a dismal and distressed economy that may possibly sink again. He is trying to tell you something. He knows that no real money has been created. Wall Street also knows that no real value has been produced and that the Fed is only suggesting a 2% growth in the GNP in 2012. Stay out of the market, now is not the time to buy. Buying now is putting your money at risk. The rise over the past three months is ARTIFICAL. When the time is right, the "smart money" will sell, then you will be stuck with the bill. The government and their financiers will be eating steak, while you will be eating chicken neck!

The New Normal

The old method of "buy and hold" will no longer work. We have exchanged normal rises and falls in the economy for stimulus that will guarntee that no one suffers loss. While we pretend that the market is stable, our seeming stability comes at a price. The cost is debt for years ahead and lethargic returns in a volatile market place. Like Japan, before us lies years of painful stagnation and inflation (stagflation) caused by government polices that smother free enterprise.

To see any gain, you will need to change from the old methods that result in continued losses and manage a more active portfolio. Seasonal Investing is a powerful source that can help you enrich your gains with fewer trades and less time with your investment at risk in the market. If your money is in the market, it is at risk. The 'Buy and Hold" strategy puts your money at risk 360 days a year. Seasonal Investing puts your money at risk only 6 months out of the year and when you are most likely to see gains.

Look at the charts below:

Over the past 34 years, stocks have risen, on the average, from the end of October through May of the coming year. Why decrease your possibilities for success by remaining in stocks throughout the year?

May through December has been, on average, the best for 10 year bonds. The bond market is somewhat oversold at this time, but gains may still be possible.

The Benefits of a "Sell in May" Strategy

Just how effective is a "Sell in May" strategy? Look at the graph below:

What we see is radical return for a BUY in October and SELL in MAY method of investing. The performance is almost 4 times that of a "Buy and Hold" method of investing. A "Buy and Hold" method is only a reason for an investment adviser to collect his fees and ignore your investment  when it looses half of its value in the next market downturn. "Oh", he will say, "you just need to ignore the market downturn, you will regain it all back. Don't miss out on the growth opportunity, after all, no one can time the market." Using these charts, you don't need to time the market. You just need to be in the market at the right time... from the end of October to the end of April.

The above charts are older charts and possibly do not accurately reflect today's market. I am, however, using this method as I make my own investments and can attest to the positive results of using this method. Some people think I am a stock guru, but by using several methods beside the "Seasonal Strategy", you can reduce your risk and elevate your opportunity for reliable returns.

ETFs to look at for overall stock and bond returns:

• VTI - overall U.S. stocks (End of October investment)
• VT - overall world stocks (End of October investment)
• BND - U.S. bond fund (May investment)
• TIP - U.S. Ten Year Treasuries (May investment)

Please, consider the stock or bond performance before buying. A Seasonal Strategy isn't blindly buying and hoping for the best. You still need to make sure that your selected EFT is moving upward in price and you need to have placed a STOP-SELL to limit your financial losses.

See the link below for a more detailed description of Seasonal Trading and methods:

http://www.seasonalcharts.com/img/ZUTEXTEN/saisonalitaet_e.pdf

You can check out the SEASONALITY CHARTS at http://charts.equityclock.com/ Simply enter the stock symbol. ETFs do not work with equityclock. You may, however, select the INDICES for an overview of the market. These are 20 year seasonal averages, the charts are free.

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

Today's Market
by Dr Invest


Yesterday, I mentioned the old "Head and Shoulders" pattern. No one... and listen... no one can predict where the market is going to go! This is more of an estimation and guess, than a science. If one could accurately predict the market, he would be the wealthiest man on earth.

No, in reality, you are like a cork that is floating on the water. When the water moves up, the cork moves up; when the water moves down, the cork moves down. Likewise, when the market moves up, your investment moves up; then the market moves down, your investment moves down. You can't control the level of the water, but you can remove your cork when the water level begins to fall.

Perhaps this pattern means nothing, but to me, it is a dangerous signal of a decline. My view is that caution is needed. Make sure you have a STOP-SELL in place.

The S&P 500 chart below best illustrates the TRADING RANGE of the Market over the past 12 years.

It is possible that the S&P 500 could range a bit higher, but I feel uncomfortable in buying into the market at this time, knowing that the market is more likely to move downward than to move upward. Most investors that I have spoken to who use a LONG-TERM BUY & HOLD strategy have not profited from the market over the past 12 years and have indeed lost money. In all fairness, a long-term buy and hold method would have performed admirably from 1990 to 2000.

A better strategy in today's market is to be out of the market on the down trend and in the market on the uptrend. Some say, "You can't really know when to get into the market and will miss the big moves." These people are repeating what they have heard by the money managers of the past. Today, you are sure to lose your money by waiting for returns that can't move higher because of our national debt.

Hussman Report

I try to tell people what I think, but occasionally someone outdoes me, eloquently expressing the subtleties of our current economic situation. John Hussman has done that in his news letter at http://www.hussmanfunds.net/wmc/wmc120416.htm.

Though written last week, the synopsis remains the same. He warns that though the trend downward is not yet deep, there is a downward trend. He recommends that people continue their successful trading methods, but be warned that the market could turn nasty at any moment.

John Hussman states: We remain defensive on the basis of an army of hostile syndromes (typified by the "overvalued, overbought, overbullish, rising yields" combination, but coupled with several others), now joined by a breakdown in market internals - not greatly observable on the basis of depth, but of high concern on the basis of uniformity. We also observe clear evidence of economic softening and recession around the world, and an early deterioration in U.S. indicators as well (though these data points are still dismissed as noise). In short, our concern about market risk persists. Our concern about the risk of an oncoming recession persists.

Closing Thoughts

Just this analysis alone brings on a furrowed brow, even though I am almost completely decoupled from the market at this time. I don't recommend that anyone else use the investment methods that I use. You will have to develop your own investment methods. But I do recommend that you recognize the bear when he is breathing in your face.

If the market returns to a brisk upward trend, I too will be looking for investments. I am at this time optimistically pessimistic.

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

Today's Market
by Dr Invest

Over the past ten days, the market has strongly moved up and then strongly moved down. There has been no real distinct direction. We can speculate about a Head and Shoulders Pattern eventhough the pattern has not fully disclosed itself.

The head and shoulders pattern is generally regarded as a reversal pattern and it is most often seen in uptrends. It is also most reliable when found in an uptrend as well. Eventually, the market begins to slow down and the forces of supply and demand are generally considered in balance. Sellers come in at the highs (left shoulder) and the downside is probed (beginning neckline.) Buyers soon return to the market and ultimately push through to new highs (head.) However, the new highs are quickly turned back and the downside is tested again (continuing neckline.) Tentative buying re-emerges and the market rallies once more, but fails to take out the previous high. (This last top is considered the right shoulder.) Buying dries up and the market tests the downside yet again. Your trendline for this pattern should be drawn from the beginning neckline to the continuing neckline. (Volume has a greater importance in the head and shoulders pattern in comparison to other patterns. Volume generally follows the price higher on the left shoulder. However, the head is formed on diminished volume indicating the buyers aren't as aggressive as they once were. And on the last rallying attempt-the left shoulder-volume is even lighter than on the head, signaling that the buyers may have exhausted themselves.) New selling comes in and previous buyers get out. What a "Head and Shoulders Pattern" Looks Like After each "Head and Shouder" pattern, there is a drop in the market. 2008, it announced one of the largest drops in the market since the great depression. Of course, we couldn't call it that, so it was simply a recession. In August of 2011, we experienced another downturn after a "Head and Shoulders" pattern. Today, I am seeing a new pattern in 2012 that uncomfortably looks like a "Head and Shoulders" pattern. The right side of the shoulder is not yet fully formed and the pattern seems smaller than I would expect, but considering that the fundamentals of the world market is not particularly strong and growth has come largely from speculation, the pattern may be more than a ghost. If this is a legitimate pattern, the right shoulder should materialize about equal to the left. My guess is that this will occur within a few more weeks. On the other hand, if this is not a legitimate "Head and Shoulders" pattern, we will continue in a sideways pattern for a bit longer. What I Plan to Do I don't want to be the market right now. The stock that I had held, sold with a TRAILING STOP. I have some investments in TIP, BND, and MBB, all which have risen in value. Should the market continue in a downward trend, these will only continue to grow in value. A STOP-SELL or TRAILING-STOP is your best protection in a volatile market.  Now is not the time to establish a position (TO BUY). Stay out of the market is my suggestion. We have already demonstrated that a LONGTERM HOLD POSITION has not been very successful over the past 12 years. This is largely due to DEBT. We have borrowed our way to prosperity, but one day, there is pay-day. That is when you hope to maintain the life-style you have always enjoyed, but lack the credit to borrow any further. Neither our government, nor the masses of our population in the U.S. are ready to give up their love for credit. This leads to sudden GAINS and then sudden LOSSES. We have been in that cycle the past 12 years. This cycle will continue. We are now at a HIGH in the market. The likelihood of the market moving higher would require a remarkable change in economic trends: for example, reduction in public and personal debt, increases in the Gross National Product... on and on. The government is only predicting a 2% increase in the GNP in 2012. Even if we hit a 3% increase in GNP, the money generated is so pathetic our economy will only keep its head above water. If you are in the market, PROTECT YOURSELF; use a STOP-SELL. Now is not the time to daly.  If the market doesn't move down in the next few weeks, it will in the next few months. Don't take a chance to lose 20% or 30% of your investment. (Note: the above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest


Nothing significant has turned up over the past week. We had a significant loss over a five-day period, then a one-day gain, only to see the market forcefully turn-down on Friday. As has been true for 2012, there is a lot of people attempting to pump investors and get them back into the market; there are also those who strongly warn that the market will collapse at any moment. In all honesty, neither the bear-perspective, nor bull-perspective has much merit. The vote for where the market will go in 2012 is still out.

The ECRI, one of the more reliable financial institutions, still strongly predicts a recession in the near future. The history of accurate predictions by the ECRI stands at 100% , and ECRI is betting their reputation on being right this time. Still, there is really no real proof that ECRI is correct.

It is hard to judge whether the market has risen from hype and hope, or risen from real fundamentals and technicals. In hindsight, I can see how being in the market could have brought a gain; but in January, the best predictions was for only a 3% gain in GNP for 2012. The stock market isn't going to grow much higher than the Gross National Product... unless.... stocks have been wildly undervalued and are now regaining that value or stocks are being overvalued and wildly traded by speculators.

I think you see the problem here. We have no remarkable signs of growth in the GNP, although there has been a small improvement in the economy. This small improvement is up for debate because we don't know if the growth is the result of increased expense.

Listen, the grocer buys milk at $3 a gallon, he sells it for $4.00 a gallon. His PROFIT is $1 per gallon. Because of the increased cost in gas, grain, and employee expense his milk is now going to cost $4 a gallon. The grocer now sells his milk at $5 a gallon. Because milk is more expensive, the customers will use LESS. Fewer gallons of milk is sold by the grocer, but when the grocer reports the total amount of paid for Milk, the amount spent on milk seems higher eventhough the grocer is selling fewer gallons. (Think about this for a moment.)

Is the increase in the dollar amount showing growth that's related to productivity? (Is the grocer really selling more milk?) No, in this case prices are elevated, but production is down because the grocer is selling fewer gallons. His quarterly report to the goverment shows a higher gross profit, but he is selling fewer gallons. The government then shows the increase in gross profit for a quarter, saying that the economy is growing, but less product is being sold. Just like milk, gas is sold in GALLONS. As the price of gas goes up, showing the companies making outstanding profits, but fewer GALLONS are being sold as people attempt to conserve their money. So you have increased profits, but less product.

This is a synthetic economy that appears to grow, when it is really shrinking.  The ECRI is pointing out that in real economic measurements, the economy is shrinking not growing. http://www.businesscycle.com/

Being patient seems to be a good course of action until the market moves in a more decisive direction. Perhaps we have had a small market correction and we will return to a continued growth in the market. I am suspicious that the market will continue to grow, if it really ever did in the first place. With half of this year's gains erased in the past 10 days, caution seems warranted.

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

Today's Market
by Dr Invest

I really have nothing to write about today, but it is good to take notice of the headlines in the economic news today. Here's one: "Don't Fear the Sell-Off". Then there is: "Stocks Rebound After April Slide".  The media machine is actively repainting the last five-day decline as an "insignificant bump-in-the-road" even though half of what has been gained this year has now been lost, it is simply a "market correction".


It is the burden of our NATIONAL DEBT that has overturned our economy. Regardless of the "crowd mentality", the fundamentals in our market is still weak. I want to keep today's report short, but go and read the Hussman Funds Report at http://hussmanfunds.com/wmc/wmc120409.htm

Rather than going into all the details of this report in my blog, you can read for yourself the varied indicators that point to the weakening market. Though some of my stocks sold at the sudden and rapid decline of the market over the past five days, I will NOT be getting back into the market anytime soon. The risk is too high and the return too small.

Expectations for Growth

In a number of market sectors, analysts have projected "double digit growth", where as the GNP is projected to grow at 3% in the best case scenario. This creates a dilemma of sorts, how can stocks grow 10% or more when the economy is growing at 3% or less? Help me here! Educate me! We can't "Quantitivly Ease" our way to prosperity. Any money poured into QE by Bernake is "your tax money at work". You are going to pay for the "feel good" sense that our economy is rebounding. A hot chocolate as the Titantic sinks is welcomed, but what you really need is a lifeboat. We have been fooled into thinking that everything has returned to NORMAL, when we will be faced with a higher cost of living and higher taxes in the months ahead... all sure to put a drag on the economy and our futures.

About Your Portfolio

There are expectations for growth found with investors. Until 2008, my entire portfolio was invested with American Century. I was heavily invested in stocks both in the U.S. and Internationally. My total average return for my portfolio was 14%. I had the sense to get out of the market before the collapse in 2008, but these kind of double digit returns just aren't possible today.

Still, I think that a double digit is the normal; today, there is a "new normal" that falls far below the expectations of the average investor. To return to the "old normal" of double digit returns would put your portfolio into a high risk situation. Financial advisers are now suggesting that you can only remove 4% of your portfolio a year without affecting your core investment, when five years ago, the suggestion was 8% could be taken each year without affecting your portfolio. There is a NEW NORMAL because our potential for growth has been arrested by the BURDEN OF DEBT carried by this nation.

What Can I Do?

Don't believe everything you read or hear about the economy. You will know that the economy is improving when you see the economic cycle return to a season of  profit. Six months or a year of economic growth will tell you that the economic cycle has changed. Listen, a true BULL MARKET will last around 10 years. Even if you miss the first year, you still have nine more years to make money.

Pay attention to the ANNUAL MARKET CYCLES. Most money is made between the end of October until January. Most often, the least amount of money is made between May until October. These are not stock recommendations, but if you did well in CATM from October to April, unless there are major changes in the fundamentals CATM, you can re-purchase CATM in October and enjoy another season or several seasons of growth in the CATM stock. As in all investments, you have to pay attention to what you are doing and to the stock you are buying. But a consistent trading plan will maximize your return and get you out of the market when there is the greatest opportunity for losses. (See STOP-SELL)

Conclusion

Listen the economy is NOT HEALTHY. SONY is in trouble. There is talk of BEST BUY biting the dust. YAHOO is laying-off 2000 employees. Spain and Italy are struggling to keep from slipping into bankruptcy. Geopolitical challenges with North Korea, Iran, and Syria make their own contributions to market fluctuations.

For now, the potential for success has become marginal. STAY OUT OF THE STOCK MARKET. Be patient and wait for the best opportunity for success. That opportunity will come and you will make all you need with little risks to your investment.