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Friday, September 22, 2006

Bad New Is...Bad News

So we’re obviously at the point when negative economic reports put pressure on the markets. Over the last few months, trying to decipher the market’s reaction to economic stimulus was basically a toss-up. Bad news was good and good news was bad. Not so any more. Investing is tough enough without having to factor in some sort of reverse psychology. As a bull, which I still am despite yesterday and the Philly Fed, I like to see a certain degree of consolidation within a trend. It helps to solidify a base going forward which ultimately is a good thing.

I think it’s safe to say that the Fed won’t be raising rates again this year, which I also believe is already priced into the market. If and when they cut rates isn’t really high on my list of concerns at the moment. What I’m trying to figure out is what’s needed in order to continue the rally that started in late-June. We know what got us here, now it’s time to find out what keeps us on track. My hope, looking at the top rated investments below, is that Tech and Financials do the job.

Short-Term Technical Indicators – Six weakened overnight, with the NYSE Advance / Decline line and the 9-Day Moving Average of the DJIA MACD the only gainers. Three are higher than last week’s levels, six are higher than last month’s, and all eight are higher than last year’s values.

I’m going to move the discussion of new highs and whether or not they’re technically supported to the back burner for the time being. If and when it happens, I’ll make sure to write about it. For the record, I still think we’ll break through the recent highs from early May 2006. As for all-time highs, I see it happening for the DJIA this year, but that’s probably it.

Long-Term Market Model – Bullish since August 23rd.

Investor Sentiment – The indicators I use are actually mixed after yesterday. Those gaining include the VIX, Total Put / Call Ratio and Equity Put / Call Ratio. The VXN and the Index Put / Call Ratio slipped a bit. One of the other indicators I use to establish sentiment is the weekly Trader’s Commitments from the Commodities Futures Trading Commission (CFTC). Last week, the long S&P 500 commercial hedges were 478,138 versus 499,864 for the shorts. It always valuable to know what the institutional investors are doing.

Asset Allocation – 75% to 85% invested within the actively-managed portion of the overall investment portfolio. 15% to 25% in cash or bonds.

Beta Exposure and Portable Alpha Generation

Top Rated Major Market Derivative – Fidelity NASDAQ Composite (ONEQ)

Top Rated Style-Box Derivative – Morningstar Small Cap Core (JKJ)

Top Rated Sector Derivative – iShares Goldman Sachs Software (IGV)

Today’s Top “Buy” Recommended Stocks
  • CPI Corp. (CPY)
  • Piper Jaffray Companies (PJC)
  • Veritas DGC Inc. (VTS)
  • Sequa Corp. (SQA-A)
  • Sears Holding Corp. (SHLD)
  • Goldman Sachs Group Inc. (GS)
Today’s Top “Buy” Recommended ProFund Mutual Funds
  • ProFunds Telecomm Ultra Sector (TCPIX)
  • ProFunds Ultra OTC (UOPIX)
  • ProFunds Technology Ultra Sector (TEPIX)
  • ProFunds Financials Ultra Sector (FNPIX)
  • ProFunds Ultra Bull (ULPIX)

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