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Hello
Subscribers!
Last
week, we saw a correction in the market of a little less than 5%.
Granted, the point drop was significant, but the percentage drop was
not nearly so significant. Don't get me wrong... it was certainly
significant enough to trigger a lot of stops, but not enough to take
us completely out of the market.
My
Investor Sentiment data are extremely Bearish for this week;
perhaps overly so. And, as such, it will not surprise me to see more
sell-off this week. In fact, when I study the repeating patterns of
the Dow over the past century (see more on this below in Tool Time,
below), it seems almost certain that we will see the market move
much lower. A lot will depend on how much panic moves onto the
'street'.
At
times like these, we need to be looking at defensive plays (cash,
oil, gold, high-yielding equities, utilities) and make sure we stay
globally diversified. I am not ready to move completely to cash...
not yet, anyway.
We
are almost at the point where the weak hands in the market are going
to move into capitulation and head for the exits. If that happens
this week, we could see another 2% to 4% drop... maybe more. If we
do not see buyers come flooding back into the market at that time,
we could easily retest the 11,722 level on the Dow, which is only
3.2% lower than where it closed on Friday.
For
the first time, some of my inverse ETFs have issued buy signals. I
am not ready to pull the trigger on any of them, yet, however. I
want to see if the Dow 11,722 level holds, first.
Market
Wrap-Up
For
the week, the Dow fell 4.36%, the S&P 500 lost 4.41% and the
Nasdaq moved lower by 5.85%.
It
was the biggest point drop for the Dow and S&P since July 19,
2002. As for the Nasdaq, it was the sharpest weekly decline since
the first week of trading following 9/11.
Our
portfolios suffered this week, as well. The ETF Total Return moved
lower by 5.7%. The Market Trend lost 6.04%, and the Stock and Option
portfolio lost 5.52%. Virtually all of this losses were due to the
fact that our stops were still below our basis levels, since most of
the positions were so new in the portfolios.
There
was a lot of worry over the government manufactured drop in the
China markets and the Yen carry-trade. Also, there still continues
to be worry about a potential melt-down in the financial markets
over the sub-prime lending industry. None of these events, in and of
themselves is overly worrisome in my opinion, but taken together
they have proven to be a substantial hurdle to overcome.
Bull
markets like to 'climb a wall of worry' and this past week saw an
unusual amount of worry in the market.
The
Bears point to all of this (plus a declining US economy, the
potential for rising inflation, the concern over a Greenspan
recession, the rising price of oil, a cooling of the China market,
the instability of emerging markets) as nothing more than validation
that global economies are in trouble and markets are going to
plummet. I believe all of the above issues are valid concerns.
The
Bulls believe all of this is much ado about very little... yes,
economies are slowing but not moving into negative growth. Inflation
is contained. Interest rates are at near record lows, world-wide.
Emerging markets are volatile, but strong. Employment is high. Job
growth is strong. Based on earnings growth, stocks are cheap and
have suddenly (after last week) gotten a LOT cheaper. Now is the
time to be watching for a bottom and then scoop up all the bargains.
I tend to agree more with this scenario... but the aforementioned
concerns are still valid.
Looking
Into the Week Ahead
We
have a lot of economic data coming out this week. My guess is the
market is looking for reasons to go lower, so the data will be
viewed with an eye toward further reasons to sell. I suspect it will
take a strong (ie, 300 point) week of upward movement to get the
Bulls back in control.
Monday:
We
will be getting the Institute for Supply Management report for
February
Tuesday:
The
revised report on Q4 productivity will be released, along with the
January Factory Orders report
Wednesday:
We
will get the Crude Inventories report, along with the Fed's Beige
Book and the January Consumer Credit report
Thursday:
The
initial Jobless Claims data will be released
Friday:
On
Friday, we get a lot of data, including: Non-Farm Payroll report for
February, Unemployment Rate for February, Hourly Earnings report for
February, Trade Balance for January and a report on Wholesale
Inventories
Model
Portfolio Update
If
we had a lot of paper profits built up, I would most likely move to
cash and wait out the next few weeks. But, we don't, so I am holding
onto my current positions and am adding just a few new defensive
plays, too.
Yes,
we could easily drop another 3% to 5% this week, but I believe most
of our holdings will weather that kind of sell-off and some may even
appreciate in value. Not all stocks go down in a falling market. I
am a big believer in a lowering tide lowers all boats, though, so I
am not anxious to have many new trades in place. Now is a good time
to just be sitting on cash.
[Editor's
Note: For more specifics about stock tickers and exact trading
strategies, subscribers should log on to the TurnerTrends website to
get detailed information about each portfolio.]
ETF Total Return
The
ETF Total Return model portfolio had the worst one-week decline
since inception this past week. We stopped out of 6 positions; all
for net losses.
The
good news is we are still up +3.7% net cash for the year and are up
+33.40% in less than 2 years!
I
will be buying an ETF and a closed-end fund this week, assuming I
get my prices. Click
here to see the details on these planned trades.
My
plan for this portfolio is keep it very defensive with ETFs that
perform well in a declining market. I am watching, but not yet ready
to buy, some of the Inverse ETFs.
Market Trend
The
Market Trend model portfolio had a tough week with 12 stop outs.
We
received dividends/distributions from DSU, PHK and BWP.
I
plan to add two equities to the portfolio this week; one from the
Basic Materials Sector and one high-yielding closed-end fund.
Click
here to see the details on both of these planned trades.
After
the sell-off last week and the two additions planned for this week,
we will be about 50% in cash. This is fine, as far as I am
concerned. We need to let the dust settle before jumping back into
this market.
My
trades this week are purely defensive.
Stock and Option
The
Stock and Option model portfolio really suffered this week due to
the stop outs on new strategies just entered on Monday. This past
week's correction hurt us, but not as badly as it could have.
Fortunately, we had closed out of 4 positions Monday morning and the
previous Friday... all for very decent profits.
I
will be putting on a single covered call trade Monday, as I move
slowly back into this market. This stock has done well over the past
2 months, including last week's correction.
Click
here to see the details on this planned trade.
Current
Investor Sentiment
We
had a huge swing in the data this week, with a ratio of nearly
19-to-1 in favor of the Bears!
The
Composite data (black line) have moved back below zero, indicating a
very strong negative sentiment. Keep this in mind... there is not a
lot of economic change between now and 2 weeks ago, when the market
was on a raging Bull run. This makes me think that we are seeing
nothing more than an overdue correction; not a change in direction
in the market.
In
my mind, a key event will be if the Dow sells off to go below 11,722
(see more on this in Tool Time, below). If it does, then the market
will have reconfirmed the current Consolidation period. It doesn't
mean we will see the Dow fall to 8,000... but it does mean that we
have not broken into a Bull market yet.
With
the overwhelming negative data, I am forced to move the Bull/Bear
Rating to a [-4], down from a [+2] last
week. | 
