Making Money Alert
High Anxiety -- Soaring Missiles, Soaring Oil
07/05/2006
One look at what happened in stocks today will tell you that there is still plenty of anxiety out there in the minds of investors. Wednesday's jolt to Wall Street came courtesy of North Korea, as the rogue nation test-fired another long-range missile.
Now, as if concerns over North Korea's nuclear ambitions weren't enough to worry this market, how about adding surging oil prices to the mix? Crude prices jumped to a record $75 a barrel today, propelled largely by a rally in gasoline prices that analysts said could send average U.S. pump prices past $3 a gallon by this weekend.
Want more reasons to worry? How about a stronger-than-expected report on factory orders that had some investors worried that economy will be strong enough to keep the Fed moving interest rates higher?
In the midst of all of this anxiety, it's important to remain objective and to analyze just where things are. Let's take a look at a three-month chart of the S&P 500 Index.
As you can see, last week the market's big move up caused the index to move above its 200-day moving average for the first time since early June. Now for those of you who subscribe to our flagship service, Successful Investing, you know that we keep very close tabs on where the market is relative to its 200-day moving average. Why? Well, because the 200-day average is often the best way to assess future market performance.
If stocks manage to hold on to recent gains, and if they can remain above their 200-day moving average, it means that this market is indeed resilient here and that stocks could be on their way higher. On the other hand, if the market takes today's sharp losses as its cue for further direction, stocks could be in danger of another significant decline.
The key number here on the downside is 1260. If the S&P 500 breaks below this level, it could mean that this market may not be as resilient as so many think. Only time, and the markets action, will tell us if the bulls or the bears will take control.
Regardless of the way this market wants to go, we will be ready to profit. Why? Because we have a proven, time-tested investment strategy based on objective analysis of what the market is actually doing, and not what we think it is going to do.
Want to find out more on how we do this?
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Big-Cap Techs -- Is the Bear About to Growl?
One of the trends in this market that is definitely not up for debate is the downtrend in large-cap technology stocks as measured by the Nasdaq 100 Index. One look at the chart below and you can see that since the May meltdown began, large-cap techs have been in a world of hurt.
Once again, a key to watch on this chart is the 200-day moving average. As you can see, the price of the index has traded firmly below the 200-day average since mid-May. But that isn't the real story.
The real story here is the trend of the 200-day moving average. Right now the average is starting to move lower. That means that over the past 200 days, the trend in the Nasdaq 100 is headed downward. In many cases, when an index's 200-day moving average begins to slope downward, that's the start of really big trouble for the sector.
Will this happen to the Nasdaq 100? We shall soon see. But what I want you all to do is prepare for the worst. I don't believe anybody should be holding large-cap tech stocks right now. That means you shouldn't be holding Microsoft, Intel, Cisco Systems, or Dell. These companies are just too risky at this point, and their upside potential is just too limited. If you own a lot of these types of stocks, protect yourself by shedding them from your portfolio.
ETF TRADER -- BEATING THE MARKET BY A MILE
We've reached the halfway point of this very volatile market year, and so far, our ETF Trader service has allocated to a wide variety of funds on both the long and short sides of the market.
So how has the portfolio performed? Well, I am proud to say we've done what I feel is an outstanding job of providing value to our ETF Trader subscribers. In the first six months of the year, the total realized return for the ETF Trader portfolio was +18%.
To get a sense of just how good an 18% return really is, we have to compare it with the major market averages. Through the first half of the year, the Dow Jones Industrial Average was up 4%. The S&P 500 was still in the black for the year, but it only managed an anemic 1.8% gain. The disappointing Nasdaq Composite didn't even manage to finish the first half in the black, as it lost 1.5% of its value through June 30.
As you can see, following the ETF Trader portfolio has put you way ahead of the game so far in '06, and I say we are just getting started. We're looking forward to another six months of big returns. Will it be easy? Definitely not, making money never is. But rest assured we'll do our best to continue providing you with the kind of returns you've come to expect from this service.
For more on how we've achieved these market-beating returns, and to see if the ETF Trader is right for you, please click here:
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LITERARY THOUGHTS WITH INVESTOR IMPLICATIONS
"A flaw in the human character is that everybody wants to build and nobody wants to do maintenance."
--Kurt Vonnegut
We all love the feeling of making that big score in the market. Hey, I'm no exception. I love making money, and I love it when I make a perfectly timed market call that causes my subscribers' portfolios to surge. But just as important, though not as exciting as watching those big winners build, is to do the maintenance work on your money during the times when you are out of the market, or when the market is in flux.
Doing the maintenance work includes the often tedious tasks of researching the right brokerage firm or advisor, or doing a full accounting of your holdings, or making sure you have the right amount of life insurance. Hey, this is all a part of the game. I know this isn't the glamorous part of the investing game, but it is necessary if you want to be successful. So, don't be a victim of your flaws. You'll have plenty of chances to build your winnings after you've done your maintenance.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Making Money Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars, or anything else.