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

Market Wrap - week ending 12/27/2013

This year has proven frustrating for short-term based strategies like our flagship “the One” strategy.  The strategy is very quick to respond to weakness and protect your investments, but as we have seen this year as we have defensively moved to cash the market each time would stabilize and continue higher, leaving us in the dust.

Obviously these types of resilient markets do not come around often otherwise we would have no need for a defensive approach.  It is important to remember this point and never get too bullish in your approach. 

In fact, looking over the past 40 years, there were a handful of years where our strategy did exactly as we are seeing occur this year, but obviously over time those underperforming years are more than made up for when we are protected and the market proceeds to have massive declines.  The two most recent examples of this were in 1999 when our annual return was less than 3% while the Nasdaq returned over 80% and in 2009 when the market returned 44% and we returned 15%.  Both of these underperforming years over time were mitigated. 

To use 1999 as an example, at the end of four years we ended up with a total gain of 4.8%, while the Nasdaq lost over 39%.  If you had invested $100,000 in the Nasdaq during this period, at the end of 2002 you have been left with $60,907 while investing in Resnn’s “the One” would have grown to $104,798.00

1999                       2000                       2001                       2002

Resnn’s “One”  2%                          0%                          7%                          -3%

Nasdaq            86%                        -39%                      -21%                      -32%

I realize this doesn’t make one feel much better when they miss out on the nice move we have had this year, but I have absolutely no doubt through the years of data analysis we have performed that even in these resilient times, it pays to remain defensively focused even if that means you miss a large up move. 

The market remains incredibly elevated, but as I have mentioned previously … it can remain this way for months longer.  Investors Intelligence reported this week that bullish sentiment was at an astounding 59.6% while bearish sentiment was at 14.1% bears.  According to Investors’ Business Daily, “this indicator is signaling a market top, but sometimes the top comes weeks or even months after the signal occurs.”

For now, our “One” strategy signals caution as we continue to sit out of the market.

In light of this strong market, we are officially introducing two new strategies that are designed to catch the longer term trends.  Where our “One” strategy is designed to catch shorter term “swing” trends in the market, these two new strategies are designed to stay invested longer and catch the medium and longer term trends. 

As an example, our longer term strategy has only exited one time this year (in June) and as a result has caught the bulk of the up move during the year.  These two new ‘longer term’ strategies in a sense move slower and require a little more effort to move in and out of the market, which can be good but also bad.

Year to date, the longer term strategy has returned over 32% while our medium term strategy has returned just under 25% and our shorter term “One” strategy has returned slightly less than 9%.  In strong trending up  markets like we have had this year obviously the longer term slower strategy will do better, since doing nothing has really been the best course of action, but these longer term strategies will be slower to move to cash when the market truly does correct and therefore will have a larger negative impact in those years.

Unfortunately, we can’t have one strategy that is the “Holy Grail” and can outperform in all markets.  There are certain times where one strategy is optimal and other times where it will underperform.  Yet, over time if you can wait out the frustrating moments, I think our “One” strategy is as close to a “Holy Grail” as you could find.  It’s defensive nature will protect your investments when the next major correction occurs.  With that said, if you would prefer to catch more of the up moves, at the expense of potentially catching more of the down moves, then a combination of our three strategies might serve you well.

I have already spoken to a number of you about our two newest strategies and will continue to introduce them to all of you via email and phone.  They certainly are something you may want to consider adding, either putting 1/3^rd in each of the three strategies, or moving 50% into one of the two new strategies and leaving 50% where it is now.

I will send you more information in the coming weeks on the subtle differences between the three strategies, so you can make an informed decision as to where you will feel most comfortable.

In the mean time, I wanted to thank you for your continued support and look forward to protecting your investments in 2014.

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 12/20/2013

Hello everyone.  This week proved interesting for sure.  Everything looked dire in the early part of the week, until the Federal Reserve announced on Wednesday their decision to end the uncertainty about its quantitative easing strategy, which the market clearly applauded.  The latter two days of the week resulted in big up moves. 

As I mentioned previously a few times, uncertainly is the market’s biggest enemy, and having clarity on the Federal Reserve’s tapering plan removed a lot of questions on people’s minds, allowing the market to continue on its’ current trajectory.

Things certainly continue to remain frothy.  In fact the latest Investors Intelligence survey shows just 14.3% of newsletter editors as still being bearish, the lowest level since March 1987.  This is not an indicator that can be used to trade with, but it is unsettling the level of bullishness for sure.  As I mentioned in the past few weekly emails, the market can remain elevated or ‘overbought’ for much longer than anyone can predict, so trying to argue or time the market based on overbought indicators tends to be a sobering experience. 

Obviously, looking over history, we won’t continue higher forever, we are clearly overdue for a correction, and it is important to remember the historical facts and not get too bullish.  The market will correct, but it might still have significant more upside before it does, time will tell. 

The next few weeks will be interesting as most investors take the time off.  The markets can move very easily and manipulation is usually highest in these low volume time periods.  I look forward to seeing if we can continue this upward directory through the end of the year.  It certainly seems like that is the path we are on with so much bullishness.

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 12/13/2013

Hello everyone, as you know from the mid-week update I sent, we moved fully to cash on Tuesday and have remained there the rest of the week.  The market has fallen 1.73% since we exited. 

Although the underlying issues that we track look quite weak at this moment, we have been in this situation a few times prior this year and the market stabilized and continued higher.   As in previous times, we are seeing a calming in the decline and in fact, not much panic at all, which is obviously keeping the market a float. 

Market sentiment is still at an all time high, which although we do not use in our trading algorithms, is notable.  If no one thinks the market will fall, then we likely will not see panic and for awhile this will keep the market in a controlled sideways move.  This doesn’t work forever, but it can for a few months if no new money comes in.

Time will tell if this time it will be different from the previous declines this year.  Certainly this year has been an anomaly, in fact one of the triggers that we use has triggered more times this year alone than over the last 40 years combined … showing that we have a strange market that isn’t acting according to the historical rules.  Moves like this usually end up badly, but there’s no reason that the market can’t continue higher from here for a time.

The next few weeks will prove trying as the big dogs take leave and volume dries up.  The last few weeks of December are usually good ones for the  market, but with such a huge rise already for the year, who knows what we will see.  Certainly with the lower volume, it is really easy for market makers to move the market at their whim, which will make things interesting I'm sure.

For now, we stay on the sidelines protecting our capital.

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 12/6/2013

Hello everyone, not much has changed since our last update.  We are still 55% invested in the market (45% of the portfolio is safely in cash), obviously no margin use these days.

Although we are still flirting with 52 week highs, the market continues to flash very conflicting messages.  For the week, the market basically broke even from a performance perspective, so we are holding up which is good.  Volume continues to be a problem on the up days, which is nothing more than a warning signal, low volume by itself is not an excuse to exit the market, but rather just something to continue to monitor along with other signs of potential weakness.  We just do not see much strength behind the up days. 

Leading stocks also are sending a mixed bag, while some are acting well, most have broken and are basing which most times would be considered productive, but with the weaker stocks leading the stronger ones, caution is certainly warranted.

Market sentiment is again at all time highs and although we do not use these indicators in our trading decisions here at Resnn, this level of euphoria is certainly not sustainable over the long haul.  I have spoken about this in previous emails, so I won’t bore you further on this topic.

For now, we stay invested with slightly more than half our portfolio at work and the other half sitting safely on the sidelines … a bit of caution goes a long ways.

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 11/22/2013

Hello everyone, a nice calm week in the market.  Although volatility has increased a bit, the market spent the week acting in a very orderly manner.  On Tuesday we added to our position, going from 55% invested to 100% invested, so now we are fully in the market with no margin use.

Not much has changed in our analysis since last week, although leading stocks are starting to look a tad better than in previous weeks.  I'm still cautiously optimistic that the market will continue its’ upward direction for awhile longer.

Clearly the market is showing strong resilience, every time we start to see a break it quickly stabilizes and continues higher.

Next week is obviously Thanksgiving, which means light volume and most times sleepy trading since the big boys are taking the week off.  Yet, historically many new trends start during holiday weeks particularly this one and the upcoming one in December.  Since volume is so low during these periods, it is really easy for a large player to move the market and of course, once the market breaks free from a previous trend most other players jump in and happily follow.  So, although I expect low volume, it would not surprise me if we get a strong move in one direction or the other.

Until then, we stay invested and watch closely.  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 11/15/2013

Hello everyone, we waded back into the market this week with a 55% exposure.  Although we are still seeing a slow breakdown of quality stocks, the market reversed is sharp decline last week and moved higher at the end of this week.  A classic “fake-out” yet again. 

We have seen our share of fake-outs this year with markets sharply dropping for two to three days, then sharply reversing and moving higher.  Fake-outs are quite normal in the market, but what I don’t like here is the level of intensity in the drops.  We’ve seen a number of times this year a relatively stable quiet market, then a very volatile sharp drop which is out of character, then a sharp rise (again out of character) after which the market settles down and goes sideways for a few weeks before doing it again. 

Looking back at history, this pattern is not normal and certainly won’t continue forever.  Generally when we get a sharp one day decline of 2% or more (like we had last week), investors get really freaked out and panic and although we usually get a small bounce up from there, the bounce fails quickly.  Here we are seeing sharp drops with an immediate sharp counter bounce up. 

The behavior doesn’t make a lot of sense.  We have extreme panic one day, then extreme euphoria the next.  Makes me think the computers are running the show where the buying is literally turned off for a few days, then a switch is pulled and tons of buying occurs … OR … the market is being supported by the Federal Government, just as panic sets in they step in and start buying to calm everyone’s nerves again. 

I’m not a believer in conspiracy theories, but something out of the norm is causing this eccentric behavior in the market for sure.  So far the best course of action this year has been to just close your eyes and ignore the daily movements, a ‘Buy and Hold’ strategy, yet as we all know this type of strategy eventually bites you when there finally is a clean break and we drop 20+%, which we are obviously overdue to do.

So, although this has been a frustrating market for defensive strategies like ours, I still have no doubt that over the long run we will win out by far.  The bull market of 1999 is a great example to compare to today’s market, it mirrors the moves almost exactly, and looking at 1999 we peaked late in the year and had a massive decline that lasted 3 years afterward (in 2000, 2001 and 2002) which wiped out all the gains and then some.  I'm certainly not going to try and imply what the future holds for us here, but I do know that this forgiving, constantly rising market cannot go up forever and we still have a lot of weak underlying issues that I mentioned in last week’s email that have not been resolved.

For now we stay invested cautiously and wait for more directional clues.

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