May ” Go Away ” Update

Saturday, May 31, 2014

 

May is in the books and VTI ( Vanguard Entire USA Stock Market )  is still on the buy signal that sounded December 31, 2011.   This trade is now 605 days old and shows a positive 62.04% return,  an average gain of 2.14% PER MONTH !   Since January 1, 2014 VTI has gained 4.2%, with half the gain in May.  This says to me the bull case is still viable and , for the moment, its OK to be in the water……but not  deep water,  because second tier indicators are signaling loss of thrust and potential stallout.

Although the NYSE  advance / decline line is making new highs  ( as are the Dow Industrials and S&P 500 ) ,  Volume is missing and fewer and fewer stocks are making new 52 week highs.  So, I’m keeping my powder dry ( 20%  invested in ETF equities, 40% fixed income ETFs and 40% cash. ) Next review date is  at June 30 close.

GOLD: Still on the March 31 sell signal.  On March 31 I took a $3,000 loss, selling GLD ( ETF =physical gold  bars )  at $123.79.    Todays price is  $120.43. I’ll invest again at the first monthly close when GLD finds itself above its 200 day moving average.

FIXED INCOME ETFs : There has been more and more talk about money flowing away from equities and into bonds….primarily the ten year US Treasury.  The ETF ” IEF ” represents 7 to 10 year US Treasuries.  There is talk from respected pundits and players saying the new normal for the ten year Treasury is not 3% but a less robust 2%, reflecting less than world beating growth by China, the US consumer and US housing.   It  has been suggested to buy ten year Treasuries at 3% and sell at 2% because 2% is where the yield will head given  lackluster economic growth conditions.  At present the 10 year Treasury yield is about midway between 2% and 3%.  The price of  IEF, $103.98 is about midway in its 52 week range of $98.60 ( low ) and  $107.59 ( high ).  Making a prediction of the future ten year Treasury  yield and IEF  price is beyond my physical risk tolerance. I’ll respect the direction if it is clear and supported by trading volume.

Pending clearly confirmed  directional movement,  I’ll just sit here on my surf board ( in 3 feet of water ) with my eyes glued to the horizon searching for ” rollers ”  and / or fins.

Richard Maurice Gore

 

 

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