S&P 500 Weekly Update for May 28, 2010

The EMA strategy continues to favor the bullish case, since 15-week  EMA > 40-week EMA.  Refer to the following chart.  I continue to hold 40% of my "investment account" in SPY with a stop at my entry price of $104.24.  As of Friday, the closing price for SPY was $109.37, which is 4.9% above my entry price.  (Refer to my posts of May 9 and 10 for my investment rationale at this time.)

Currently, I am long FXE (Euro) and short the dollar through UDN (inverse $ ETF).  In addition, I am long the TNA (3x Small Cap Bullish ETF).

True Meaning of Memorial Day!

Let's not forget to give thanks this weekend to the countless number of individuals that served and died courageously for the freedom that we enjoy today.  Freedom does have a price; and sadly for many, it has been their lives.  I want to thank each of you who have served this country.

So, You Want to Buy Gold

You know that gold is near at least a short-term top when when you can purchase gold from a vending machine, as in Abu Dhabi, or sell gold to your barber.

Video Update on SPY

You can view my comments on SPY over at Twitter.

Update on TNA (3x Small Cap Bullish ETF)

Twitter

For my inter-daily investment ideas and thoughts, check my Twitter.

S&P 500 Weekly Update for May 21, 2010

Weekly Investment Activities

For those of you who follow me on Twitter, know that is where my daily investment activities and thoughts are posted.  As of Friday, May 21, my investment position is basically neutral.  That is, I am out of my shorts [DXD (Ultra-short on DJIA) and DZZ (Ultra-short on Gold)].  The DXD trade was purchased on May 10 for an 11.91% profit.  The DZZ trade was purchased on May 17 for an 8.81% profit.  I did take a position on UNG (Natural Gas Fund) on Friday and quickly sold it for a 2.51% loss.  (I don't know why I even bother with natural gas.  It has never been kind to me.)  I am still long FXE (Euro) at $123.23 with a stop at $120.51.  That position has a unrealized gain of 1.73%. The price objective (IMHO) for the FXE trade is $129-$130. 

Overall, I am still bearish; however, the market is due for a bounce after declining 4% this week, which is the rationale for selling my bearish positions.  I plan to reinstitute the DXD position and probably add SDS and TWM to it when this rally runs its course.

For those of you that track the exponential moving average (EMA) strategy, I will have that updated later this weekend.

Q&A Relating to the Global Financial Crisis

Click here but no embedding options.  It's a satire but very profound.  Enjoy!

It's Just not Greece!

Note: To enlarge, double-click inside of it.
Not one single country in the EU is in compliance with its Stability and Growth Pact, which limits budget deficits to 3% of GDP. (In other words, where is the incentive for any country to be in compliance? Answer: Absolutely none. If the pact was enforced, it would discipline every single country for allowing its deficits to exceed the pact. What a joke!) And what is the EU's solution? Simply more debt, which is totally insane. You don't cure a debt problem with more debt. You just buy a little bit of time! And, that is what the EU has done. You may want to consider buying the following ETFs: EPV (200% short the MSCI -- Europe Index) and EUO (Ultra-short 200% Euro).

S&P 500 Weekly Update for May 14, 2010

For those of you following the EMA Strategy, stay the course. Be prepared for a test of 1,100 on the S&P 500, which, of course, is the 40-week EMA.

DXD (Ultra-short DJIA)

I redeployed a third of the proceeds from the SPY trade this morning with a position in DXD at an average cost of $26.54. I am still interested in SDS and TWM.

Fannie Mae: Some Things Just Don't Change

Fannie Mae has again asked Mr. and Mrs. Taxpayers for more money after reporting a first-quarter loss of more than $13 billion. They have lost $137 billion so far and keep adding to it quarter after quarter, and are still allowed to operate. Don't you just love these government run businesses? Isn't America great?

Fannie Mae, which was rescued by Mr. and Mrs. Taxpayer, in September 2008, said it needs an additional $8.4 billion from the government to help cover mounting losses. Why not, if Mr. and Mrs. Taxpayer has given billions to Greece, the least they can do is give $8 billion to Fannie. Right? (I should point out that Mr. and Mrs. Taxpayers only constitute 52% of Americans that pay Federal Income Taxes. For those of us that have this elite status, our taxes are going to sky-rocket!)

SPY: Pre-Market

I just sold my 60% position (pre-market) in SPY at $116.02. For the remaining 40% position, I have changed by sell-stop order from break-even ($104.24) to $110.95, which is 5% below its 50-day SMA of $117.10.

For the Love of Greece!

The International Monetary Fund (IMF) is lending Greece about piece $286 billion. Since the United States is "required" to contribute 17% of the IMF's funding, this means that you, Mr. and Mrs. Taxpayer, have just been hit for $48.6 billion to cover Greece's debts. In other words, the solution to a debt crisis is to pile on more debt at your expense, Mr. and Mrs. Taxpayer.

But, it even gets better for Mr. and Mrs. Taxpayer. The Federal Reserve System's "swaplines" have been reopened, which could conceivably pay for part or all of the European Central Bank foreign bond buying of up to $1 trillion. The Fed said that these facilities are designed to help improve liquidity conditions in U.S. dollar funding markets. (Wait a minute! The dollar is not under pressure. It is the Euro.) The arrangement with the ECB will provide them with the capacity to conduct tenders of U.S. dollars fro the Euro at fixed rates. And get this, these swap arrangements have been authorized through January 2011.

The DJIA in pre-market trading is up close to 400 points. Wow! The markets are loving it. That's right. Just pile on more and more debt. Its gotta work, right? My investment strategy has not changed from yesterday. I will liquidate 60% of my SPY positions and start to redeploy the investment proceeds into the following ultra-short ETFs (DXD, SDS, and TWM).

Weekly Update: Exponential Moving Average (EMA) Strategy for the S&P 500

The week was not kind to equity holders. Please review my comments within the following chart:

Note: To enlarge the chart, double-click inside of it.

Since September 21, 2009, I have been 100% long SPY in my investment account with an average price of $104.24. As of Friday, May 7, SPY closed at $111.26, which is a gain of 6.73% from my average price of $104.24. My strategy for Monday, May 11, is to sell 60% of my SPY holdings. With the remaining 40%, I will place a sell-stop order at break even ($104.24). With the 60%, I will start to acquire 20% positions in each of the following ultra-inverse ETFs: DXD (Ultra-short DJIA), SDS (Ultra-short S&P 500), and TWM (Ultra-short Russell 2000 Small Cap). Once again, this is my strategy, which is high risk, for my investment account. It is not a recommendation. You have to decide your own risk tolerance. Those of you that have been utilizing the EMA strategy and are comfortable with it, I would recommend that you continue to invest according to the 15-week EMA and 40-week EMA game plan.

Market Plunge Baffles Wall Street, Really?

If you have been "MIA" over the past several days, you might be wondering what happen to the market this week, especially on Thursday. Thursday was the day that the DJIA had its biggest "intraday" point drop of nearly 1,000 in its history. For the week, the DJIA dropped 628.18, or down 5.7%, which was the steepest drop since the week ended October 10, 2008, in the midst of the financial crisis. Why? There were the usual excuses. The one that I really like is "somebody's wayward finger got in the way." The rumor goes that a trader error was the cause of the fiasco. That is, the trader had mistakenly entered an order for $16 billion, instead of $16 million. Then, of course, you have the Greece situation and our own debt woes, which were nothing new to the market.

I, for one, like to look at various technical indicators for possible clues for the drop. (By the way, I will update the exponential moving average strategy for the S&P 500 later today.) Several of these indicators are as follows:

1. Mutual funds currently show only 3.5% cash. Everything else is invested. This 3.5% matches the all time low, which occurred in July 2007. If you forgot about July 2007, that is when the DJIA plus Dow Transports made its all time high.

2. The VIX, a measure of volatility on option premiums, has been around its lowest level since May 2008.

3. The DJIA's dividend yield is 2.5%. The only market tops of the past century at which the dividend year was lower are those of 2000 and 2007, 1.4% and 2.1%, respectively.

4. The P/E ratio for the S&P 500, using four-quarter trailing real earnings, is 23, which is in the area of market peaks. As a point of reference, P/E ratios of 6 or 7 occur at major market lows.

So, where do we go from here? I believe, for what it is worth, that the bear market rally from March 2009 has ended. This bear-market rally was fueled by the FED's quantitative easing policy that injected close to a trillion dollars of liquidity into the financial system, which ended up in financial assets, like equities, not in productive loans to sustain an economic recovery. In other words, the FED's stimulative activities have been a total failure, except for Wall Street. Thursday's action (IMHO) is a precursor for further market declines. I will be taking some very defensive and bearish measures near term to position by portfolio for the ensuring bear market. As indicated, I will update the S&P 500 exponential moving average strategy along with some bearish ideas later this weekend.

Private Sector Adds 32,000 Jobs

Automatic Data Processing Inc. (ADP) reported today that private payrolls grew in April by 32,000, while layoff announcements fell to a near 4-year low. At least the addition of 32,000 private sector jobs is somewhat good news. The reason I say somewhat good news is that the U.S. needs to create about 150,000 jobs each month in order to simply balance the incoming supply of workers.

What I like about the ADP survey is that it tallies only private-sector jobs, while the Bureau of Labor Statistics' nonfarm payroll data, which is to be released this Friday, include government workers. That is why my focus is always on the ADP monthly survey, because it surveys the creation of jobs in the private sector.

Primer on How Goldman Sachs Used Credit Default Swaps

Note: To enlarge picture, double-click inside of it.