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Published byErick Charles Modified over 9 years ago
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Rational Investing Special Interest Group Economic Climate and Market Weather Conditions Presented by Herb Geissler, Managing Director of St.Clair Group February 2014 combines fundamental and technical analysis Without Using VectorVest
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Current Bear Market Not As Severe as prior secular bears (yet) 50% below today’s level
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Production of Goods and Services Been Declining for Over Two Years
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US Economy Sliding Downhill
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Because Rising Federal Debt Stifles Economic Growth
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Employment Still Stagnant Claims decreasing as workers leave workforce
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And Social Benefits Consume More of Limited Incomes
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Further Dampening Retail Sales
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All Key Measures Show Continual Weakening Since 1990
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Key Economic Indicators Improved But Are Still Weak
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Global Economy Also Still Weak Bulk of dry-ship volume is moving Asian goods to US and returning with commodities for Asian production
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Yet Stock Market Advanced Fearlessly, Sucking In Money As It Did During Roaring 90s
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Market Gains Primarily From Expanding PE Multiple
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QE Provided That Liquidity Anomaly: Stock market gains despite higher interest rates means over-abundant cash
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Resulting in Only Two Corrections During Past Five Years
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Major Indexes Pressing Against Long-term Resistance Levels
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Pushing Market Valuation To A Dangerous Extreme Q Ratio = Market Valuation to Replacement Cost
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Key Points Federal spending, funded by debt, is choking economic growth, as dysfunctional Federal Government avoids addressing core problems Fed Reserve IOUs (to fund excessive debt) lubricates stock prices, but make inevitable solutions increasingly more painful Market Valuations are at unsustainable extremes, but can remain so for quite a while
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Implications For Investors Despite the facts, Media and Wall Street Analysts are extremely bullish for 2014 But remember Warren Buffet’s advice to: Sell during greed; Buy during panic For Individual Investors, this means: Sell when proven market-measures roll to downside Buy back-in when those measures rollover to upside Monitor moving averages weekly or monthly Discipline to act promptly
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What To Do? Keep drinking, as long as bartender keeps pouring cheap drinks Benny’s Bar “flicked the lights” in January Remain sober and watchful to jump out of harm’s way, before “last call” (2/1/14???) Use disciplined decision-making tools to know when to shift positions
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Index ETFs Were Up Over 20% But Turned Bearish on January 31
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Defensive Asset Class Strategy Missed the Strong Stock Surge
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Sector Strategy Gained 19%, But Now Moves Into Cash
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Troubled Emerging Markets Have Gone From Bad to Worse
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Intermediate-Term Net- Out Economic uncertainties churning markets and sectors into short, choppy trends Excessive liquidity raised aggregate, causing Index Funds to perform well as stock market “melted upward” Risk and size of correction increased daily and finally has arrived Knowing “How big and how long” is less important than “when to get out and when to get back in”
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Weather Forecast for Swing and Position Traders It’s hard to outperform Index Funds Stock selection remains challenging; holding periods tend to be short Short, choppy trends makes trading rules and discipline more imperative than ever
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Fed Reserve Turned Corrections Into Dips
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Optimism Remains High, Intuitionals Remain “Fearless”
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McClellan Summation Turned Bearish on Wed. January 29 And rebounded from trendline support
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Barely 1/2 of S&Ps Are Bullish And fewer big stocks get out of bear territory, creating an unsettling divergence
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Now, Correction Is Underway MA 50 Broken but Trendline Held 185-170 = 8% 185-159 = 17%
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50/50/0 Rules Keep Position Traders on the Right Side of the Market Still below zero
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Net-Out for Position Traders It’s hard to outperform Index Funds Simple MA timing keeps you out of trouble Stock selection remains challenging; holding periods tend to be short Use 50/50/0 rules to avoid excessive whipsaws Short, choppy trends makes trading rules and discipline more imperative than ever Monitor daily as position trader or monthly with diverse strategies in the spreadsheet CD
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Any Questions?
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