July 31 All Clear

July 31, 2014

No black swans in sight.

My technical barometer, the Vanguard VTI ( total  stock market ) trade of December 30, 2011 , in which I have no investment, is now 647 days old and returning 66.36%.  For my purposes it confirms stock market trend until August 31.  At that time, I’ll look to see if VTI’s price is still above it’s 2oo day moving average.  If it is, my technical barometer signals positive.  If VTI’s price is below it’s 200 day moving average, I sell everything and wait at least  until October 1, for  a safe to re-enter signal.

Confirming my technical barometer is my take on global interest rates.  European central banks are attempting to reflate similar to our early QE  efforts. by pumping money into their economies.  This money  will flow to the highest return ( after considering risk ).  That means that the US 10 year treasury note ( yielding 2.5 % ) is competing for new money with say  Spain’s risky debt at  approximately  the same interest rate.  Let’s say ( and I do say ) it is  logical for a lot of this new money to flow here to relatively risk free instruments. In this market, the yield on bonds competes for money with the earnings yields  ( earnings divided by price )  on stocks..  As more overseas investors move money the Dollar will strengthen, the Euro will weaken and Gold will weaken and bond yields will exhibit a downward bias as bond prices are bid up.  Now entering the ring is USA stocks whose earnings yields are widening in relation to USA bonds  ( whose yields are under downward pressure because of increased demand and shrinking supply) .  And the winner is…..USA stocks.  For me, this is additional confirmation that the positive trend for stocks continues.

My QQQ/Zacks theoretical  portfolio of February 18, plus 10.2%, is outperforming  SPY. But, this is momentum stuff and can turn on a dime and underperform SPY on the downside.

But, this outperformance has caused me to invest ( as of yesterday ) $28,000 in the seven Zacks number 1 rated equities which appear as a component of the QQQ 100. How is that for no research !  Just Zacks opinion and being a component of the outperforming QQQ 100…since April 30. I invested $7,000 apiece in  Avgo Technologies, Broadcom Corp., Celgene, Charter Communications, F5 Networks, Intel and Nividia. This portfolio will be on a very short leash.

I will continue to Dollar Cost Average into SPY….( 1/12 of my remaining cash ) using VTI rules.

I will continue to monitor daily  volume activity of a whole host of  equities and ETFs I’m interested in.

And I will get back to you, new IRA investors,  to let you know what I’m up to and why.

 

Richard Maurice Gore

PS – With the market falling today as a result of overseas debt problems – I will postpone my SPY purchase for a day or two to see if I can purchase at a more attractive price. My thesis still stands.  Fear money arriving from Europe will only serve to lower US Bond yields making US stock yields even more attractive on a relative basis.  The dollar is strengthening as the fear level rises. Here comes the money !

PS 2-  I don’t see Argentina and Portugal as Black Swan events because third world debt problems are no surprise to the global market.  Maybe this is a good opportunity to shake equities from weak hands.  The 200 day moving average model is good till August 31.  Could be a long 30 days. !

PS3 – According to Friday NY Times , citing Bloomberg as its source,  the yield on the 10 year Treasury note is less than half it’s fifty year average.  Compare that to the projected earning yield on USA stocks and I think it makes a pretty compelling case for the continuance of the USA bull market  ..especially against the backdrop of Europe creating even cheaper money to spur reflation.

 

 

 

 

 

 

 

 

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