Making Money Alert
The Technicals Turn Black
07/07/2010
The overwhelming bias in both the domestic and international equity markets right now is to the downside. Sure, there have been a few nice up days over the past three weeks, but those short spurts of buying have been upstaged by the wider bearish trend. The overall downward slide in stocks since mid-June now has caused the phenomenon known as the “black cross.”
The black cross occurs when the 50-day moving average (blue line) falls below the 200-day moving average (red line) (see chart below). This is a definitively bearish development for stocks, and it is this blackened technical environment that has me so concerned about what’s next.
In my opinion, the jury is out as to whether we are going to see better economic conditions in the second half of the year. On the plus side is the coming of what I expect will be a solid quarter in terms of corporate earnings. Manufacturing data have been strong, and corporate balance sheets are in pretty good shape. On the downside is that persistent unemployment problem, a weak housing market and a lack of consumer confidence.
Until we get a solid read on the direction of the economy going forward, I expect to see sellers in control of both domestic and global markets. That means you have to be extremely cautious here with your money. It also means that cash and cash equivalents are still the safest, best places to be with your money. Sure, you aren’t getting much interest, but you also aren’t subjecting your money to any market risk -- and that’s a winning proposition in my book.
If you’d like to find out more about when to move your money into cash, and when to put that money back into the market, then I invite you to check out my Successful Investing advisory service.
We’ve been keeping investors just like you out of harm’s way for more than three decades with our proven trend-following Fabian Plan, so isn’t it time you put the power of the Plan on your side?
Is It Time for Gold?
Gold has been on a decided uptrend since mid-April, in direct opposition to the trend in the equity markets. It makes sense, as gold usually is seen as a safe haven against tumult in equities. Gold also is seen as a good investment when the value of the U.S. dollar declines, although the latest run higher in gold occurred despite a stronger dollar.
The most recent trend in the yellow metal -- the trend taking place over the last week -- has been decidedly lower. As you can see by the chart here of the SPDR Gold Trust (GLD), an ETF pegged to the spot price of gold bullion, gold recently fell below its short-term, 50-day moving average.
This pullback in gold actually has put GLD on my short-term buying radar, as I am bullish on gold due to what I see as continued weakness in equities. I actually would like to see gold fall below its long-term, 200-day moving average, as that would shake out many of the weak holders. It also would represent a nice, low-risk buying opportunity in a commodity that investors have been smiling on for some time.
Of course, we haven’t seen gold correct below the 200-day average in some time, so it might be a long wait before we see gold prices pull back to this degree. Still, the current drop in gold below the 50-day average definitely has my attention, as gold prices may just be “reloading” on their way to shiny new highs.
ETF Talk: Hail the Safety of Long-Term Treasury Bonds
The stock market’s volatility is enough to make any investor a bit cautious. You can go long or go short but the daily gyrations of the market are enough to make even the riskiest investing personality seek at least a little safety.
One way to protect a portion of your portfolio is to put it in long-term U.S. Treasury bonds. Such bonds are backed by the full faith and credit of the U.S. government. In today’s world of record federal budget deficits, I can appreciate that such guarantees are not as compelling as they might have been in the past. However, there may not be another national government viewed by investors as creditworthy as the one based in Washington, D.C., which still is the capital of the free world.
The iShares Barclays 20+ Year Treasury Bond Fund (TLT) offers a way to tap the U.S. government’s reputation as a dependable creditor. The exchange-traded fund (ETF) seeks to produce a total rate of return that tracks the long-term sector of the United States Treasury market through the Barclays Capital U.S. 20+ Year Treasury Bond Index. The fund will mark its eighth year of existence on July 22, so it is one of the more established ETFs around.
The long-term nature of the fund also means that its share price is more likely to rise and benefit from capital appreciation than short-term treasury funds as interest rates fall. Worries about inflation seem less immediate than deflation right now, in light of the ongoing housing bubble, job losses and economic weakness. With government bond funds in general not paying much interest, the additional reward that an investor can gain from the capital appreciation potential of long-term bonds is worth considering. It also sure beats going long in the stock market and watching the value of your holdings melt away.
The preceding chart shows that TLT has been on a sharp climb since April. The fund is showing no signs of losing its momentum as many investors are looking for a place to protect their money when the stock market is retreating. If you sleep well at night at the thought that a portion of your money isn’t tied to the ups and downs of the stock market, now might be an ideal time to consider making an investment in TLT. It is a fund that I have recommended in the past and that I am keeping my eye on right now.
To obtain my latest ETF advice and my stop prices for each recommendation, I urge you to subscribe to my ETF Trader service. As always, I am pleased to answer your questions about ETFs, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.
Fabian Teleseminar: Mid-Year Review and Market Outlook
Join me Saturday, July 10, at 12:00 p.m. (noon) Pacific Standard Time, for a FREE discussion of the rapidly changing 2010 financial markets. In this teleseminar, “Mid-Year Review and Market Outlook,” I will be speaking about how you should position your portfolio for what promises to be a tumultuous second half of 2010.
As you’ve likely noticed, things are not going well with the stock market. We saw stocks fall below their long-term moving average in May -- an event that hasn’t happened since January 2008. The major indices now are firmly in negative territory for the year, and many investors are looking for new, safety-first strategies to protect their wealth.
During this one-hour teleseminar, I will share with you these key points:
• A recap of the financial markets in the first half of 2010. What’s worked, and what hasn’t.
• How to read the price trends in the markets, and what they’re telling us.
• What investment themes I believe represent the best opportunities in the second half of 2010.
• A glimpse of my ETF watch list for the rest of the year.
• Most importantly -- how to evaluate your current investment positions so that you don’t get hurt again.
All teleseminar registered participants will receive a valuable handout ahead of time that outlines the key topics. To join me for this timely discussion on Saturday, July 10, please register today and make sure you reserve your place. This FREE, one-hour teleseminar will be limited to the first 800 registrants. Judging by our last three record-setting teleseminars, we will reach capacity quickly. Take advantage of this opportunity and reserve your spot today!
NOTE: Fabian Wealth Strategies is a SEC registered investment adviser, and is not affiliated with Eagle Publishing.
Radio Show Update 7-7-10
Last week’s radio show covered some of the wild happenings in financial markets during the first half of the year. We also discussed what’s in store for the latter half of 2010, and how you can position your assets for both safety and growth. If you missed last week’s show, don’t worry. As an Alert reader you have FREE access to my Radio Show archive, and all you have to do is go to the website and listen for yourself, whenever you have time.
Coming up on this Saturday’s show, we’ll have a discussion on:
• Mutual funds vs. ETFs — which are the better option?
• Trouble with Invesco Funds
• Plus, your phone calls and much more
It all goes down live, this Saturday from 10 a.m.-11 a.m. Pacific Time. To find out how you can listen to the show live, simply click here.
The Errant Pursuit of Equality
“Americans are so enamored of equality that they would rather be equal in slavery than unequal in freedom.”
--Alexis de Tocqueville
About 150 years ago, the great thinker Alexis de Tocqueville warned us about the errant pursuit of equality and its negative consequences. As the idea of equality of outcome rather than simple equality of opportunity gains popularity in the halls of Congress, I fear that freedom will be the ultimate casualty.
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 Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars or anything else. Click here to ask Doug.
Sincerely,
Doug Fabian
P.S. It’s not too early to start making plans to join me at the MoneyShow in San Francisco, August 19-21. This year’s event will be held at The Marriott Marquis and will feature 50 of the world’s smartest investors, traders and analysts. To join me in San Francisco, you can register FREE of charge by calling 800/970-4355 and mentioning priority code 018509 or by visiting the MoneyShow’s website at The MoneyShow San Francisco!
P.P.S. My publisher, Eagle Financial Publications, is now on Facebook. Click here to see our page and be sure to become a fan when you get there.