The news on Friday certainly helped the markets; however the Dow Jones Industrial Average (DJIA) posted another weekly loss of 63 points (-0.62%) for the week closing at 10,151. The S&P 500 lost 7 points (-0.66%) to close the week at 1072. For the month the DJIA is now down 3.01% and the S&P 500 is off 3.36%.
The MSCI (EAFE) World Index posted a narrower weekly loss of 0.22% on little news. The Euro gained slightly closing at $1.2733 from the previous week's close of $1.2705.
Gold gained just over $8 per ounce to close at $1237.90. Oil closed up slightly showing some strength for the first time in a couple of weeks.
US treasuries pulled back and the yield on the 10-year note rose to 2.625% from last week's close of 2.6160%.
FED PLEDGES SUPPORT FOR THE ECONOMY
The seemingly benign data changes from the previous week does not fully capture the market gyrations, especially Friday's jump in stocks of over 1.6% to help the week cut many of the losses from the earlier four days of trading. However, it is difficult to find much solace in the fact that the overall economy is slowing at an alarming rate at a time in the market cycle when the opposite should be occurring. Chairman Bernanke's expression of the Fed's support to do whatever it will take to keep the economy expanding gave the market's an important boost of confidence, but I remain cautious going forward.
Overall, bonds had a slightly negative week as a result of Friday's trading. Hardest hit were long-term US treasuries which had been showing a lot of strength recently. Bonds are priced for long-term weak economic performance and low inflation. Watching interest rates is extremely important in this current market because if rates start to rise, bonds could lose value and surprise investors who think of bonds as a "safe" investment. Nothing can be taken for granted.
Markets are going to continue digesting every bit of economic news in these uncertain times. Volatility reflects investors' lack of certainty and they are swayed like tree branches by the prevailing breezes.
From a technical view, both the DJIA and S&P 500 are below support levels. The S&P 500 violated its long-term support line of 1070 last week. This support line had been in place since the market turnaround in March 2009. Last Friday notwithstanding, I believe the markets continue to show considerable weakness and investments should be made in only the strongest technical positions.
International markets and cash are currently emphasized among my broad categories (US Stocks, International Stocks, Bonds, Currencies, and Commodities) with international favoring emerging markets. Asia ex-Japan and Latin America have shown the greatest strength.
Utilities, Real Estate, and Telecommunication Services continue to show the greatest strength recently while Information Technology and Industrials were the weakest. Financials in general were just ok; however, I am concerned about the banking sector as many of the major banks have performed poorly and have low technical scores.
Bonds continue to be solid investments; but as I pointed out in my earlier comments, investors cannot close their eyes to interest rates and must be vigilant to rising interest rates and falling bond prices. I believe that for now that is unlikely to become a trend in the near-term. Gold remains my hedge against uncertainty.
The jobs report on Thursday will again be front and center on investors' minds as an indicator economic recovery.
If you have any questions about the overall relative strength of your portfolio and would like my analysis, please do not hesitate to give me a call.
Corporate bonds contain elements of both interest rate risk and credit risk. Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and if held to maturity, offer a fixed rate of return and fixed principal value. U.S. Treasury bills do not eliminate market risk. The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income.
As always, if you have any specific questions on your portfolio or wish to talk to me, please do not hesitate to call.
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Paul Merritt, MBA, AIF(R). CRPC(R) Principal NTrust Wealth Management
Past performance is not indicative of future results and there is no assurance that any forecasts mentioned in this report will be obtained. Technical analysis is just one form of analysis. You may also want to consider quantitative and fundamental analysis before making any investment decisions.
Information in this update has been obtained from and is based upon sources that NTrust Wealth Management (NTWM) believes to be reliable, however NTWM does not guarantee its accuracy. All opinions and estimates constitute NTWM's judgment as of the date the update was created and aresubject to change without notice. This update is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities must take into account existing public information on such security or any registered prospectus.
The bullish percent indicator (BPI) is a market breath indicator. The indicator is calculated by taking the total number of issues in an index or industry that are generating point and figure buy signals and dividing it by the total number of stocks in that group. The basic rule for using thebullish percent index is that when the BPI is above 70%, the market is overbought, and conversely when the indicator is below 30%, the market is oversold. The most popular BPI is the NYSE Bullish Percent Index, which is the tool of choice for famed point and figure analyst, Thomas Dorsey.
All indices are unmanaged and are not available for direct investment by the public. Pastperformance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe.
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