Happy New Year!
Rankings of Average Momentum Index(AMI) for iETF and sETF have been posted at : http://yechen.pan.googlepages.com/
Year-end review, 12/28/2008
In my mid-year review, I pointed out at that time that it felt like we were in a recession. Finally, it was official that we were in a recession. According to the National Bureau of Economic Research, we have been in a recession since December 2007! The effect of the credit crunch has finally spread to the whole economy. In September, one financial institute after another went into trouble and by October, the U.S. financial system had almost collapsed. Reluctantly, in an effort to rescue the nation’s banking system, the treasury department set into motion the 700 billion dollar bailout plan, but the damage had already been done. In December, the auto industry was in danger of bankruptcy due to the freeze of credit, which forced the Bush administration to provide 17.4 billion dollar loans to prevent the disorderly liquidation of the industry and save the nation from depression. The U.S. government has pulled all the strings and the Federal Reserve has lowered interest rates to 0 – 0.25%, a historic low, to ease the lending and stimulate the economy. With the new administration and new congress coming into office in January next year, economy policies for the past 8 years are coming to an end. Hopefully, the change will bring back confidence, help economy restructure itself, and resume its expansion for the long haul.
The U.S. stock market tried to rally in March but failed to uphold the gain. The S&P 500 index headed south in May and has not since climbed above its trend line (EMA[28]). The weak rally signaled trouble was on the horizon. Sensing the economy was in great danger, the market started the sell-off in September. As the financial system was in jeopardy in October, the sell-off intensified. Within 3 months, the stock market experienced the biggest drop in decades. The S&P 500 index lost 9.5% in September, 17% in October, and 7.4% in November. From the beginning of this year, the S&P 500 has lost 40.5%, and the NASDAQ composite index has lost 42.4%.
This year, losing less means winning. For our model portfolios, SSPP, nSSPP, and iETF have been in cash positions since July and had escaped the October market sell-off. However, SELECT, ETF, and sETF did not fare as well. They tried to hang on to the stronger market sectors and hope for a rebound when the economy was heading south. Finally, they yielded to the vicious sell-off in October, which dragged down every sector in the economy, and moved to the sidelines with big losses. The FEMKX timing model, based on the stochastics, turned in the best performance this year. It went to a cash position in June and only lost 2.9% this year.
In this vicious bear market, it is important to execute the trading plan in a diligent manner. From our record, if you bought and held the NASDAQ composite index for the past 4.5 years, you will end up with a loss a little more than 20%. On the other hand, if you closely followed one of our original model portfolios (SSPP, SELECT, and ETF), you will still come out with a profit!
For now, we can only wait patiently, with cash at hands, for the trend reversal. It may be soon or it may take a while, but we will know when the time comes.
Fund Rankings Update, 12/26/2008
Weekly Average Momentum Index (AMI) rankings of SSPP, nSSPP, SELECT, ETF have been posted at: http://yechen.pan.googlepages.com/
As the year is coming to an end, there is not much activity on the trading floor. Dow Jones Industrial Average lost 0.74%, S&P 500 index went down 1.7%, and NASDAQ lost 2.18%. Volumes are light because most of the traders are on holiday break. Stock market has fluctuated around the same level for the past 2 weeks. Stochastics of S&P 500 index, which we are closely monitoring for trend reversal, stands at 25.8 this week, about the same as 2 weeks ago.
As the year is coming to an end, there is not much activity on the trading floor. Dow Jones Industrial Average lost 0.74%, S&P 500 index went down 1.7%, and NASDAQ lost 2.18%. Volumes are light because most of the traders are on holiday break. Stock market has fluctuated around the same level for the past 2 weeks. Stochastics of S&P 500 index, which we are closely monitoring for trend reversal, stands at 25.8 this week, about the same as 2 weeks ago.
iETF and sETF rankings update, 12/23/2008
Merry Christmas and Happy New Year!
Rankings of Average Momentum Index(AMI) for iETF and sETF have been posted at : http://yechen.pan.googlepages.com/
Rankings of Average Momentum Index(AMI) for iETF and sETF have been posted at : http://yechen.pan.googlepages.com/
Fund Ranking Updates and FEMKX update, 12/19/2008
Weekly Average Momentum Index (AMI) rankings of SSPP, nSSPP, SELECT, ETF have been posted at: http://yechen.pan.googlepages.com/
The market was encouraged by the Federal Reserve's lowering of the interest rate to 0 - 0.25 %, a historic low, and Bush's announcement of the 17.4 billion auto rescue plan. S&P 500 index went up 0.93%, NASDAQ composite went up 1.53% for the week. Government's stimulus actions will take sometime to work their way through economy. Hopefully it will be sooner than later.
Here is an update for our FEMKX timing model using stochastics. We have moved to sideline since 6/13/2008. FEMKX closed this week at $13.01 with weekly STO[15,1] standing at 15.14 way below the buy signal of 50.
FEMX Trading Log
The market was encouraged by the Federal Reserve's lowering of the interest rate to 0 - 0.25 %, a historic low, and Bush's announcement of the 17.4 billion auto rescue plan. S&P 500 index went up 0.93%, NASDAQ composite went up 1.53% for the week. Government's stimulus actions will take sometime to work their way through economy. Hopefully it will be sooner than later.
Here is an update for our FEMKX timing model using stochastics. We have moved to sideline since 6/13/2008. FEMKX closed this week at $13.01 with weekly STO[15,1] standing at 15.14 way below the buy signal of 50.
FEMX Trading Log
Fund Buy On Buy@ Sell On Sell@ P/L
FEMKX 03/26/07 $25.15 08/06/07 $29.53 17.42%
FEMKX 09/10/07 $28.98 12/28/07 $33.82 16.71%
FEMKX 04/28/08 $31.73 6/13/08 $30.81 -2.90%
CASH 06/13/08 $1.00
iETF and sETF rankings update, 12/16/2008
Rankings of Average Momentum Index(AMI) for iETF and sETF have been posted at : http://yechen.pan.googlepages.com/
Fund Rankings Update, 12/12/2008
Weekly Average Momentum Index (AMI) rankings of SSPP, nSSPP, SELECT, ETF have been posted at: http://yechen.pan.googlepages.com/
After auto rescue bill died on senate floor late Thursday night, Wall street shook off the bad news and stocks climbed higher Friday. As we discussed last Friday, this is a bullish sign for stock market, since bad news is not driving down the market anymore. With this kind of sentiment, market is most likely building a short term bottom at this level.
Chart below shows the weekly price movement of S&P 500 index. In May-June this year, the index fell below its 28 week moving average, its STO dipped below 75 and has remained below 50 since then. In July, the index try to rally but fail. Its STO climbed above 20 but ccould not get over 50 and the index failed to take itself above the 28 week moving average. Due to the market action in the past two weeks, the STO has climbed above 20 again. We will pay close attention to see if the index can keep its momentum this time and climb above 50 to uphold the up trend.
After auto rescue bill died on senate floor late Thursday night, Wall street shook off the bad news and stocks climbed higher Friday. As we discussed last Friday, this is a bullish sign for stock market, since bad news is not driving down the market anymore. With this kind of sentiment, market is most likely building a short term bottom at this level.
Chart below shows the weekly price movement of S&P 500 index. In May-June this year, the index fell below its 28 week moving average, its STO dipped below 75 and has remained below 50 since then. In July, the index try to rally but fail. Its STO climbed above 20 but ccould not get over 50 and the index failed to take itself above the 28 week moving average. Due to the market action in the past two weeks, the STO has climbed above 20 again. We will pay close attention to see if the index can keep its momentum this time and climb above 50 to uphold the up trend.
iETF and sETF rankings update, 12/09/2008
Rankings of Average Momentum Index(AMI) for iETF and sETF have been posted at : http://yechen.pan.googlepages.com/
Fund Rankings Update, 12/05/2008
Weekly Average Momentum Index (AMI) rankings of SSPP, nSSPP, SELECT, ETF have been posted at: http://yechen.pan.googlepages.com/
Wall street put on a brave face over government's dismal employment report. Stock market initially reacted badly to the report but turned around to the upside in the afternoon. The S&P 500 index gained more than 3% for the day. This usually is a good sign for the market since investors are expecting worsen economy condition and won't be surprised by any bad news. Any better than expected economy new from now on is going to rally the market. Maybe Santa is coming to town.
As trend followers, we are still patiently waiting at the sideline. We may miss some short term rallies and even initial rally if the bear trend reverse itself but it is always better and with less risk to buy into the market when the up trend is well established.
Wall street put on a brave face over government's dismal employment report. Stock market initially reacted badly to the report but turned around to the upside in the afternoon. The S&P 500 index gained more than 3% for the day. This usually is a good sign for the market since investors are expecting worsen economy condition and won't be surprised by any bad news. Any better than expected economy new from now on is going to rally the market. Maybe Santa is coming to town.
As trend followers, we are still patiently waiting at the sideline. We may miss some short term rallies and even initial rally if the bear trend reverse itself but it is always better and with less risk to buy into the market when the up trend is well established.
iETF and sETF rankings update, 12/02/2008
Rankings of Average Momentum Index(AMI) for iETF and sETF have been posted at : http://yechen.pan.googlepages.com/
Now, they tell us what we have known and felt for a while that we have been in recession since December, 2007. The timing is much earlier than we expected, and in my opinion, this is just a ploy to lead us to believe that the recession will be over soon. It took more than 9 months for the effect of housing price collapse to be felt by the financial system. The effect of financial crisis is far more reaching and will take more time to ripple through the whole economy. It will take us a while to climb out of this hole.
Now, they tell us what we have known and felt for a while that we have been in recession since December, 2007. The timing is much earlier than we expected, and in my opinion, this is just a ploy to lead us to believe that the recession will be over soon. It took more than 9 months for the effect of housing price collapse to be felt by the financial system. The effect of financial crisis is far more reaching and will take more time to ripple through the whole economy. It will take us a while to climb out of this hole.
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