We had a good week as we gained ground in both portfolios by switching to our “red flag” mode on Monday and going with two inverse funds in the Standard Portfolio and one in the 2X.

In the Standard Portfolio we have (FXY) Japanese Yen Trust, up +0.9% for the week and (EUM) ProShares Short Emerging Markets ETF +3.5% for the week with the other three positions in cash.

In the 2X portfolio, we bought (EFU) ProShares Ultra Short EAFE (Europe, Australia, and Far East) on Monday and sold it on Friday for a weekly gain of +6.9% and we entered the weekend with both positions in cash.

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Year to Date the Standard is -3.7%, the 2X is -6.1% and the S&P 500 is -4.5%.
It was quite a week as the major indexes logged their 4th week in a row of losing numbers and we had triple digit moves on the Dow in three out of the five trading sessions. 

It sounds like the “bad old days” all over again, doesn’t it, and the VIX, the “fear” indicator, responded by jumping to its highest levels since the November correction. 

On the Point and Figure charts we had multiple “sell” signals in former high flyers like (EEM) Emerging Markets, (QQQQ) the Nasdaq 100, (USO) United States Oil and (XLF) the S&P Financials.  Also a number of major issues are starting to pierce their 200 Day Moving Averages including The Shanghai Composite and SLV, iShares Silver Trust.

The carnage has been particularly brutal along the Pacific Rim with (EWT) the Taiwan index -14%, (EWH) Hong Kong -10% and (FXI) China -15.7% from their yearly highs of just three weeks ago. 

Of course, things haven’t been that great at home with the S&P 500 down -7.3% from its year high of January 19th. Not to mention that the Dow almost lost the coveted 10,000 level yet again and would have closed substantially below that milestone without a near miraculous last hour rally that managed to lift it back to 10,012. 

One can only wonder how and why things improved so dramatically in the last hour of trade in front of “Snowmageddon,” the blizzard bearing down on the east coast on Friday afternoon.

We remain in the “red flag” mode, expecting lower prices ahead, and next week should offer more fireworks for us to behold.  I suspect we could get a recovery rally on Monday and then we’ll be getting more news on the economy, earnings and the G7 meeting that will surely affect things as we go through the week.

The View from 35,000 Feet

The bad news for the week surrounded Portugal, Spain and particularly Greece as worries about sovereign debt defaults continued to swirl.  The sad part about this is that the United States isn’t so far behind these guys in terms of financial difficulties, but that’s a story for another day.

Our news was mostly focused on the Friday payrolls report which came in with a monthly loss of 20,000 jobs instead of the expected rise of 25,000.  This was a major miss and spooked the markets, as well it should since there are fewer jobs in America today than there were ten years ago and this is not the recipe for emerging from recession.

Since the onset of the recession, 8.4 million total jobs have been lost and 2009 set an all time record for this dismal topic.  Friday also saw the 16th bank failure of the year and so “Bank Failure Friday” looks like it will be an ongoing tradition in 2010 in spite of the so called recovery underway.

The Week Ahead

I think we can expect the volatility to continue as we have several major economic reports and corporate earnings reports ahead.  Thursday will be the marquee day with the employment numbers and January Retail Sales Report, followed by Friday with the February University of Michigan Consumer Sentiment Report

Major Earnings Reports:

Tuesday: Disney

Wednesday: Coca Cola

Thursday: Marriott

Major Economic Reports:

Tuesday: December Wholesale Inventory

Thursday: Initial Unemployment Claims, Continuing Unemployment Claims, January Retail Sales

Friday: Michigan Consumer Sentiment

Sector Spotlight:

Leaders: Gold Miners, Semiconductors,

Laggards: Turkey, Spain, Silver

It’s Super Bowl weekend again, that uniquely American tradition, and, of course, there’s a “Super Bowl Indicator” for the stock market. This indicator says that when a team from the old NFL wins, it’s an up year for the stock market.  Since both of this year’s teams are from the old NFL, it’s a sure touchdown that this year will be up.  But the “January Indicator” says that “as January goes, so goes the year,” and with January a down month, 2010 will be down, as well.  

For my part, I’m going to ignore these so called “indicators,” stick to my charts and enjoy the game.  I hope you do, too.

-Written by John Nyaradi From Wall Street Sector Selector

 

 

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