Market Wrap - week ending 1/31/2014

This week was another tough one for the market, which closed a tough month as well.  For the week, the major indexes closed with a loss between 0.5% (S&P500) and 1.15% (Dow and Russell 2000), and for the month of January, the indexes closed with a loss of between 1.75% (Nasdaq) and over 5% (the Dow). 

Volatility has risen to scary levels, with wild intraday swings.  Today as an example, the market opened with a over a 1% loss, then spent half the day rising to get all the way to break even, then dropped a little over 0.5% at the close.  These wild swings usually portend major trend changes, as fear starts to set in and day traders get extreme with their behavior.

The next week will be critical for the bulls to see if they can get control again, otherwise it looks like we have further to fall.  The market has been so resilient over the past year that I wouldn’t count on a drop, but certainly with each passing day things are looking more ominous. 

Looking at the charts of the major indexes, the Dow looks broken, NYSE looks broken, S&P500 looks broken, Russell 2000 looks broken … get my point?  Only the Nasdaq looks a bit better although it also is struggling.

It looks as though the market is giving a final “kiss goodbye” for those of you that want to learn technical analysis, Google that … it’s an interesting phenomena.  We should know by the end of next week whether this was indeed a kiss or just another fakeout.

As you know, “The One” moved to cash on Monday, and interestingly our medium term strategy went fully to cash on Wednesday.  Only our longer term strategy is still invested.  The fact that 2 of our 3 strats have left the market is probably a warning sign in itself that the character of the market has changed.

Short term things are definitely broken, Medium term things are broken or breaking (in the Nasdaq’s case), but long term we are still ok, not great, but ok.

Regardless of the outcome, we will continue to monitor and act accordingly protecting your hard earned investing dollars …

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

Our market wrap is published weekly, sent via email on Friday after the market close, with alerts sent occasionally mid-week in particularly volatile times.  To sign up for this free service, please visit our website at http://resnnInvestments.com

Market Wrap - week ending 1/24/2014

Today we had another nasty drop in the markets. The Nasdaq which has been the strongest acting index for weeks lead today’s decline with a drop of 2.15% .  Even the Dow which generally speaking is the most defensive index and the least impacted during a decline fell almost 2%.  The breadth of the decline was wide (very few stocks were shielded from it), which is not a good sign.

Since the first of the year we’ve had a very shaky market, lots of wild swings intraday, which usually portends a top … not necessarily implying a major decline, but certainly a decline.

Volume for the past two weeks has been way above average with very little price movement, which tells us the market is struggling to make headway in its’ current direction (up).  Strong volume with no upside gain can be a signal that the big guys are exiting while there are still buyers in place.  They unload gobs of shares to the unsuspecting.  This works well as long as the buyers outnumber the sellers, but what we saw today is that the buyers dried up and the selling continued, causing the market to crater.

Except for the Nasdaq, the 50 day moving average was taken out in high volume today.  A moving average is exactly what it sounds like … it is the average price over the previous 50 days and used very heavily to help institutional investors get a gauge of the state of the market.  When it is healthy, the current price is above the moving average, and the MA is rising, and when things start to get iffy we see the market close below it and eventually the average itself starts curving downward.

Who cares … right??  Well, the 50 day moving average is a particularly good indicator for many traders because most big funds use the 50 day to buy.  So they wait for the price to fall back down to this level, then they start purchasing and the price bounces higher as a result.  Many ‘value’ investors use this important level as a buying opportunity.  But, today, we saw the market pierce below the MA with NO slow down and in fact, volume increased as the price kept falling below it.  There was no support there … which isnt a good sign.

The 50 day average was broken on the Dow, NYSE and S&P500, while the Russell 2000 (small caps) and the Nasdaq are still holding above it for the time being.

Volatility has been increasing over the past few weeks but went through the roof today, which is a troubling sign as well.  This means people are getting nervous and getting sketchy with their trades.  In fact the VIX which is a measurement of market sentiment and fear of investors rose almost 30% today … the highest level since October of last year. 

As I mentioned in previous posts, the market is very ‘pricey’ right now, so dropping a bit should bring in the value buyers that have been sitting out.  Of course, time will tell whether their buying will reverse the decline and bring more gains (which is exactly what happened last year in April, June and October) or whether they will sit out this time and let the market correct properly.

We are VERY late in this bull ‘cycle’ which started in March 2009 with no major correction since and we are VERY overdue for even a mild correction since we haven’t had anything sizeable in approximately a year and a half.  Late cycle markets are usually bumpy … so today isn’t surprising in that regard.

Looking at the market using a longer term perspective, from a technical analysis standpoint, we are still very much in an uptrend on all indexes and holding a small amount in the market for a bit longer to see if the strength will resume when prices fall a bit is prudent.

Our new volatility trigger kept us in today, although we were close at one point to exiting.  The new signal gives us a little more ‘cushion’ to ride the small bumps in order to gain the larger move. 

For now, we remain cautious with only a 30% investment in our flagship ‘The One’ fund and still fully invested in our longer term strategies.  Short term, things are definitely broken or breaking (in the Nasdaq’s case), but long term we are still looking at a healthy market, although a bit frothy.

Regardless of the outcome, we will continue to monitor and act accordingly protecting your hard earned investing dollars …

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

Our market wrap is published weekly, sent via email on Friday after the market close, with alerts sent occasionally mid-week in particularly volatile times.  To sign up for this free service, please visit our website at http://resnnInvestments.com

Market Wrap - week ending 1/17/2014

Another fun week in the market.  While we started the first day of the week with a sharp decline, the very next day we had an equally sharp reversal completely erasing the sharp downside from the day prior.  The rest of the week we have had a relatively quiet consolidation (sideways movement), which generally speaking is good healthy action after such a volatile two days.

For four weeks now we have been trading at virtually the same level, with small caps and more risky technology oriented companies (IWM and QQQ) slightly higher, and the larger more traditional firms (S&P500, NYSE and Dow Jones) slightly lower.  While it is a sign of strength to see the riskier stocks holding up better, clearly the market is having trouble making up its’ mind as to whether it wants to go higher.

As I mentioned in my mid-week alert on Monday, volume has increased over the past few days which obviously means more activity … more shares changing hands, and can mean the bigger institutional firms are moving to a more protective stance raising cash OR simply just people taking profits off the table.  With the market holding relatively strong, moving sideways at this stage I have to think that this is just healthy profit taking and nothing to be concerned about.

All psychological indicators are still at decade level highs which isn’t something to be excited about, but these indicators are secondary in nature and therefore not good to use in your investment decisions.  Although they usually indicate a top is forming … it could take months for the completion to occur.

For the time being, we stay invested but in a cautious manner.  We were close to adding more exposure this week, but the lack of strength kept the buy signals from firing.  As you know, we take a cautionary approach and would prefer to sit on the sidelines during periods of uncertainty vs. being fully invested (i.e. taking on more risk).

It was nice to see our new volatility trigger keeping us invested in the market after Monday’s severe drop, given that Tuesday’s move completely erased the decline.  Prior to the installation of this trigger, we would have exited the market on Monday and been left in the dust on Tuesday’s rise.  This is exactly what this new trigger was designed to do … keep us invested in times of weakness when the weakness isn’t at concerning levels to cause a full exit to cash.  If we had this indicator running last year, we would not only have had much more profit by the end of the year, but also we would have had many fewer trades throughout and therefore less costs associated with our accounts.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

Our market wrap is published weekly, sent via email on Friday after the market close, with alerts sent occasionally mid-week in particularly volatile times.  To sign up for this free service, please visit our website at http://resnnInvestments.com

Market Wrap - week ending 1/10/2014

This week the market moved sideways with very little gain.  The market started the New Year with 3 sharp down days of approximately 1% and has since stayed within that 1% level … We have not fallen below that 1% and have not been able to get above it.  There was some concern that investors that have been in the market for more than a year would start taking their profit off the table creating the start of a correction, but so far except for those first days, the market has been consolidating in a very orderly manner.

Volume has been quite high, which tells me that indeed there is lots of selling going on, BUT … obviously there is an equal amount of buying going on or prices would be dropping.  So for now the market is holding up nicely and the decline that started on the first day of the year has been totally contained.

As you know, we implemented a small but critical change in “the One” strategy that has kept us in the market this week.  We rolled out this change on the first day of the new year and as a result our exposure immediately went from 0% invested to 30% invested, and we have remained there since the first trading day. 

Although we added this new component to the strategy, the actual core strategy had not fundamentally changed.  It gets the same buy and sell signals as before, what has changed is that there is a new ‘trigger’ or ‘switch’ that forces us to stay invested regardless of what the other signals are saying IF and only IF the volatility is not out of the norm.  So, if the market is acting in a relatively calm manner (as it has been over the past two weeks), we will not go to a full cash position even if there are other warning signs.  But when a real correction finally arrives (as it will), this volatility switch will trip, allowing us to exit the market and be protected from the bulk of the decline.

This change specifically addresses the whipsaws that happened this past year, where we would see weakness and

defensively move to cash, only to see the market stabilize and continue higher, leaving us in the dust.

So, although we still see warning signs, we remain partially invested.  The market is definitely overdue for some kind of correction, but as I’ve mentioned in the past … market tops can take months to form and so we remain invested with our volatility triggers protecting us for when that time comes.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

Our market wrap is published weekly, sent via email on Friday after the market close, with alerts sent occasionally mid-week in particularly volatile times.  To sign up for this free service, please visit our website at http://resnnInvestments.com