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The PIIGS Impact the Markets

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First, let me say that the several days post April 15 are always crazy as we try to catch up on all the things that get put aside during tax season. Consequently, the blog has been ignored while we’ve been hard at work playing catch up and managing portfolios.

That said, not much happened until today that I hadn’t written about earlier – the market got ahead of itself and we were raising cash into the run higher.

Today, however, news that Portugal’s debt was downgraded and Greece’s bailout was still not certain led investors to raise some cash. You can see from the chart above that we had a pretty significant selloff that was contained by the 34 day moving average. You can see the little tail on the candlestick that touched the moving average line but closed slightly higher.

The run up since February has been happening on below average volume until the past week or so. Then, a euphoria seemed to hit the market as people who have been sitting on the sidelines decided to move cash into the market. The herd is usually wrong, which is why we’ve been taking the opposite tactic.

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On the chart above, I’ve drawn two of the oscillators that I follow: the McClellan Oscillator and the Summation Index. I like this chart because if gives me a feel for the short-term and intermediate-term psychology of the market.

The red area graph dipping below the zero line shows that the market has turned negative – and it did so even as the near-panic buying was going on over the past week, but is not yet oversold. Short-term, this tells me we are likely to have a bit more downside before its time to put some of the cash we have accumulated back into the market.

The green line hovering around 40 is still nicely positive, but not yet overbought. This tells me that on an intermediate term basis, we are likely still in a general up-move and that once the red area graph (or maybe some other indicator we follow like the relative strength index) gets oversold, we will want to increase our equity exposure…maybe not to fully invested position (there is a lot of news risk out there plus lots of other fundamental headwinds) but earnings are strong and indicative of higher equity prices down the road absent something crazy.

When we start adding to positions, I’ll let you know.


Click Here to watch Buffalo Springfield video on YouTube

As we fast approach the 35th Anniversary of the Fall of Saigon on Friday, I wanted to give you one of my favorite 60’s songs. Obviously it’s the Buffalo Springfield singing in this video, but the name of the song never appears in the lyrics. Your trivia for today is to tell me where the name of the song got its origin – and I’ll be honest, I only know the story that I’ve heard a few times in the past – so if you know for sure, please share!

Mark