Good morning! Yesterday I started a ruckus by mentioning the "S" word. I will try to avoid that today. But if you are bored and want a good laugh, read yesterday's thread. I even got called a racist! It was fun for all - I think.
Well, another b-day down, another year older.
I'm far from achieving the retirement beyond my wildest imagination that was being promoted by TSP during the 90s, but overall I can't complain.
The market action of late is distressing if you are invested, and we are drawing danger close to the line in the sand I drew for the S&P at 1060. If this were artillery I would be dead. I will be monitoring the market very closely now to see if this point is breached, and then I have to start making some decisions about my trade. As long as we remain in this channel I feel secure, but if we breach all bets could be off. Leading individual stocks (market leaders) have been holding up fairly well too, so I am also watching them for cues of a market getting ready for a big roll down. Of interesting note to, I see that IBD still has the market classified as "Uptrend Under Pressure". I figured their method of counting distribution days would have chenged that already.
I only see one economic report for today, and it is real estate, so it will probably be bad. Futures are also pointing to a lower open. This market has been rough. Just 2 weeks ago the S&P 500 hit its most recent peak of 1128. Economic worries persist, fueling concerns that the year-old recovery is stalling or possibly even running out of steam. We’re also about to head into September and October, which have historically been two of the roughest months of the year for stocks, so some investors may be taking cover early.
The next two months will be interesting, and to be honest, I doubt we get a good rally until the results of the coming election are almost certain - a suckers rally!
I've got a lot of good stuff to post this morning.......so stand by!
I got this from an email that ChartAdvisor.com sends out each week. It is a free subscription service and I like to read the commentary because it usually covers the S&P 500. Here is what the email that came out over the weekend said:
Commentary: It was a volatile week on Wall Street; the markets started out strong, gave it all back and then ultimately finishing close to where they started. The week began with a bounce that carried into Wednesday before a sell off on Thursday that spilled over into Friday. After breaking down to new August lows on most of the major indexes, the markets finished the week with some late-day buying that erased most of Friday's declines. In the end, the markets did little to clear up the picture and left traders wondering whether they are close to breaking down or providing a buying opportunity.
The S&P 500, as represented by the S&P 500 SPDRS (NYSE:SPY) ETF, remains in an interesting position in which two scenarios are developing that are at polar odds with each other. The first is the idea that a very large head-and-shoulders top has been forming over the past year and that the markets are getting ready to embark on a new down leg that could end up heading to much lower levels. This scenario would become much more plausible on a break of the July lows.
The second scenario, which is occurring on a much shorter time frame, is the idea that a tradable low is forming in this area and that the markets are simply consolidating the 2009 rally. The price action that began in late May through the present time is also taking on the shape of an inverse head and shoulders and is in direct conflict with the idea that a much larger topping pattern is close to completion. The neckline for this pattern is near $113 and a break above this level would solidify the odds that this scenario will occur. The markets could really head in either direction at this point, and traders need to be patient as the move could be explosive in either direction.
The Bottom Line
The markets are truly in a position where a large move can occur in either direction. There are many mixed signals as well, making it even more difficult to get a read on price action. Traders need to remain patient and keep a watchful eye on some clearly defined levels. Just beneath current price action is a clearly defined support level that has held over the past year. Just above price action is a price level that has acted as resistance over the past two months. Clearing either of these two ranges will begin to stack the odds in a trader's favor, but until then, traders are probably better served relaxing as the summer winds down.
I like to read what Cumberland Advisors puts out on market commentary. I posted a part of their most recent release. If you want the full article go to their site………..
Cumberland Advisors, Mid-August Bullets, August 22, 2010
Let’s get to the Federal Reserve. Bernanke’s big speech from Jackson Hole will focus attention on the new Fed paradigm.
In the pre-Lehman days, the old Fed managed interest rates as their primary policy tool. The Fed’s balance sheet approximated $900 billion, mostly Treasury securities, on the asset side. The liability side was essentially the US dollar-denominated currency circulating throughout the world or held by banks as reserves while being parked in ATM machines. That paradigm is dead.
The new Fed paradigm adds over $1 trillion in securities on the asset side. The Fed is trying to transition from GSE-sourced mortgage paper to Treasuries as a substitute. On the liability side, the Fed now holds $1 trillion of excess reserves, parked with the Fed by the large banks. Nobody knows what the appropriate size of the Fed’s balance sheet should be in a climate characterized by trillion-dollar Federal deficits, 10% unemployment, growing regulatory oppression, high political uncertainty, and the rising geopolitical risk outlined above.
Bernanke is the classic “man in the middle”. His policy back is against the wall of the zero boundary in nominal interest rates. He fully understands the rising risk of deflation. He knows he must do whatever it takes to keep the United States from sliding into a Japanese-style lost decade. Markets wonder whether the Fed is running out of “bullets.” Bernanke’s task at Jackson Hole is to make the Fed’s arsenal credible.
We believe the Fed has the arsenal. They have worked on it for nearly a decade. Clues may be observed in earlier Fed speeches by Bernanke, Reinhart, and others. One needs only to read that history.
Juvenile market observers don’t read history these days. Eyestrain from text has been replaced by irritating TV sound bytes and 30-second summaries. In times like this, we take comfort in being among the “old dogs.”
Our bond accounts are fully invested in high-credit-quality spread instruments. There are plenty of opportunistic places for bond investors. Treasuries are rich. Tax-free munis and Build America Bonds are cheap.
Cash earns zero. At Cumberland, our allocation to cash is zero.
Many of the stock markets of the world are cheap. That includes the US, selected countries in Europe, South America, and Asia, and selected currencies, regions, and sectors. We are nearly fully invested in our ETF accounts worldwide.
Lastly, the next eight weeks are the treacherous part of the investment calendar. September in particular is the most dangerous month. During years when the Fed was tightening, the outcomes have included the famous market crashes of 1929 and 1987. We thank Guy Rosa for the reminder.
During years when the Fed was easing, their actions neutralized the seasonality. The Fed has just affirmed maintenance of its balance sheet size. The Fed did not commence shrinkage. Transition from rapidly prepaying mortgages to substitute holdings in Treasuries is not a tightening, it is a lateral transfer of an easing position.
