iShares S&P 500 weekly

Chart courtesy of StockCharts.com

Current signal: CASH

We will wait for price to close above the horizontal trendline before issuing a new BUY signal.

iShares S&P 500 Weekly

Chart courtesy of StockCharts.com

Current signal: CASH

Weekly media scan

In the news there was some talk of financial market regulation and the creation of new agencies to cover consumer interests among others. President Obama is in Asia seeking a "broader engagement" with the region. Asia will be the growth engine in the years to come. More recently the Obama administration commented on Germany's strength as an export nation, saying the US can learn from this. With the US dollar declining, American exports will become more attractive abroad, increasing domestic production. By the way, consumer sentiment unexpectedly fell.

The recovery does seem to be on track. A Fed official made some encouraging statements this week, though not on the job front:

Fed's Yellen sees signs of jobless recovery
By Greg Rob, Nov 10

WASHINGTON (MarketWatch) -- "The most recent economic data suggests that the U.S. could be about to experience another jobless recovery, said Janet Yellen, the president of the San Francisco Federal Reserve Bank on Tuesday. The past two recessions, in 1991 and 2001, were followed by so-called jobless recoveries, and "things seem to be shaping up similarly this time around," Yellen said in a speech in Phoenix. "I believe the overall economic recovery is likely to be gradual and remain vulnerable to shocks," Yellen said. With such a slow rebound, unemployment could stay high for several years to come."

iShares S&P 500 weekly

Chart courtesy of StockCharts, www.stockcharts.com

Current signal: CASH

Long term trend: DOWN (50 week MA below 200 week MA)

Analysis : Stocks strengthened this week and the correction may turn out to be very mild. We will wait for the horizontal trendline around 110 to be broken before issuing a new BUY signal. Better to play it safe.

Weekly Media Scan

Market Recovery in 2010

Nov 3, 2009, Drew Kanaly on Fox Business

Drew Kanaly thinks the highs in stocks have been seen for the year. He also discusses the USD carry trade and its influence on asset prices. Watch the video here.

iShares S&P 500 weekly

Chart courtesy of StockCharts, www.stockcharts.com

Current signal: CASH

Long term trend: DOWN (50 week MA below 200 week MA)

Analysis : Stocks stabilized this week and the correction may turn out to be very mild. We will wait for the horizontal trendline around 110 to be broken before issuing a new BUY signal.

Results of the strategy for the past 2 years

During the past two years, the strategy has provided 5 signals (marked by the arrows on the chart below).

• A CASH signal in November 2007 (well before the market crash)
• A SELL signal in December 2007
• A CASH signal in July 2009
  
• A BUY signal in July 2009
• A CASH signal in October 2009

Overall the profit was 38%. This compares with a significant loss of 28% when using a buy & hold approach for the same time period. At the worst, the drop from the high in July 2007 to March 2009 was over 50%. The additional benefit of the strategy was that no sleep was lost due to the market crash.

Chart S&P 500 Index (2 years):

Chart courtesy of StockCharts, www.StockCharts.com