Market Wrap - week ending 3/28/2014

This week was a bit nasty, with the leading and smaller cap stocks (Nasdaq and IWM) taking heavy losses continuing the month long decline that started in early March.  Larger (safer) stocks are doing much better although most are still not profitable, just staying flat for the same time period. 

This rotation to larger companies is fairly normal when declines occur or when fear that a larger decline is mounting, because the large players move their money from riskier positions to more defensive positions.  This week as an example, we saw the BioTech companies get hammered while utility and telecom companies did quite well.

I have commented on this defensive rotation in the past.  Many times it is a precursor to an impending larger drop in the near future.  Mutual funds and most hedge funds are unable to move their assets out of the market even if they wanted to.  They are literally forced to stay invested by their charter, which means that their investors are unfortunately not protected during large drops in the market.  So, to minimize the negative impact, they try to find safer alternatives in the market or high dividend paying investments that tend to weather corrections better.  These ‘safer investments’ still drop when markets correct, but their declines are usually less extreme or the dividends paid help offset the capital loss that occurs.  I actually spent some time on this interesting phenomenon in my upcoming book, entitled “Buy and Hold Hope” due out in just a few months.

You probably have noticed our accounts over the past two weeks have been slowly lowering their exposure in the market, moving more and more assets into cash.  Both “the One” and our medium term strategy have exited completely, with the longer term strategy still invested fully.  I always find it interesting when the different strategies start moving in step, verifying in a sense the need to be cautious right now.

It is interesting to note that the S&P has experienced very little loss from the high made earlier this month, in fact it is less than 1% off the top, yet the Nasdaq has fallen over 5%.  All of the indexes have basically made no money year to date.  With the Dow, Nasdaq and Russell 2000 in negative territory and the NYSE and S&P500 barely putting in a profit (less than 0.5%).  In fact most stocks have made little money since before thanksgiving last year, moving sideways instead.  This sideways movement (or consolidation) isn’t abnormal after such a strong rise in 2013 and in fact is healthy.  Granted, if money doesn’t start moving in to the market soon, it can imply a larger decline is coming.  So far, things are holding up and the current decline is mooted.

Regardless of the outcome, we will continue to monitor and protect your accounts.  Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com

Market Wrap - week ending 3/21/2014

A fairly dull week in the market although today certainly was a little nasty with the market making a downside reversal.  We started the day flirting with new highs (on the S&P only) and then ended closing at the absolute lows of the day, with the Nasdaq and Leaders being hit particularly hard.  From the start of the year most stocks have made very little if any upward movement.  We are in a consolidation (sideways movement), which can be healthy for a longer term move, if we can regain a leading position.

For now we wait and see if the markets can keep acting well.  We lightened our margin position in our ‘the One’ strategy slightly, although we are still on margin.  The other strategies still are fully invested.

Not much new to discuss in the market this week … we are just in a holding pattern waiting for the market to make a decision as to which way it wants to go.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com

Market Wrap - week ending 3/14/2014

We find ourselves again in a declining market with the Dow, NYSE and S&P500 all in negative territory for the year (again) and IWM and QQQ (small caps and technology focused ETFs) not far above the breakeven point.

For our ‘the One’ strategy, we started the week at 100% (no margin use) and lowered our exposure mid week to 75% invested.  The market is starting to look weak again, although I think we are very close to another bounce up from here.  We have dropped a bit too much in the past week to not get some rally attempt.

Our longer term strategies are still both fully invested and are waiting for more signs of weakness in order to warrant an exit.  With a bounce (up) overdue, I would assume we will not get to this exit point in the coming week.

The market is definitely looking a bit more shaky than it did over the previous three weeks.  Down days having significantly higher volume than up days, and the down days have larger price movement ~ fear is creeping in.  More importantly, I am starting to see many individual stocks breaking apart, particularly the previous leaders.  As I have mentioned in the past, leaders ‘lead’, so if they are falling apart … it isn’t too much of a stretch that that rest of the market will follow.

Volatility remains inflated which drives the fear card, mostly driven by news events including China’s production numbers and the Ukraine situation.  And as I mentioned last week, market sentiment is still overly bullish, which as ‘secondary indicator’ is not reliable enough to use as a trading signal, but should serve as a warning sign of a potential problem down the road.

I expect to have a resolution in the coming week, whether we reverse and move back to new highs OR continue the downward slide … as we are close to the level where a bounce should occur, and if it doesn’t then I expect to see further downside quickly.  Of course, whichever way the market direction goes, we will focused on protecting your investments.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com

Market Wrap - week ending 3/07/2014

Another productive week for the market.  As you see above, we exited margin and went back to just 100% invested.  For those of you that have do not have margin accounts, there was no change in your allocation; you were fully invested at the start of the week and you are fully invested at the end. 

As you have heard me say before, margin use should only be used in opportune times when the market indicators are all aligning nicely.  Since being on margin increases the risk on your account substantially, we only want to use it sparingly.  So … with the increased volatility that we have seen this week mostly as a result of the Ukraine situation, I feel it is best to remain off margin for the near term.  We are still fully invested (100%), and I still feel the market is acting very healthy, just took some of the risk off the table.  Protecting your account from decline will always be our number one goal, paramount to generating profit.

Looking at the previous week, the market had a huge decline on Monday from the Ukraine uncertainty then bounced back on Tuesday completely erasing all the previous days’ losses.  Our analysis did not show dramatic selling pressure on Monday and so we did not feel any change was necessary in our accounts.  As the week has progressed we have seen an increase in selling although nothing that causes too much concern at this point.

The market continues to act fairly well with the only concern cropping up being that investors are starting to get complacent again.  Although we do not use market sentiment in our analysis, it is just something to note that when there is too much bullish conviction in the market it can lead to a pullback.  Market sentiment is a ‘secondary indicator’ which basically means that it isn’t reliable enough to use as a trading signal, but that it a warning sign of a potential problem down the road.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com