Update for Friday, October 30, 2009

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This week's hot topics are:

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THE LINK TO OUR CURRENT MUTUAL FUND/ETF STATSHEET is:

http://www.successful-investment.com/StatSheet/SS102909.htm

This StatSheet is updated through Thursday, October 29, 2009.
The next scheduled update will be Thursday, November 5, 2009.

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Friday, October 30, 2009

WHACKING THE BULLS

This week lacked nothing in excitement as Thursday's bullish rebound was completely wiped out today and then some. For the week, the Dow gave back 2.6%, while the S&P 500 and Nasdaq dropped 4% and 5.1% respectively. For the month, the S&P 500 lost about 2%, its first losing month since February.

The culprits behind today's sell off were a weak report on consumer spending as well as consumer sentiment. The consequence is likely to be an economic recovery in slow motion, especially once government stimulus packages have run out.

There is nothing new here; I have been talking for months in my various updates and blog posts that the current recovery is based on nothing but stimulus. Unless it is accompanied by job growth, it really has no legs to stand on and neither has a stock market rally, which has taken us into the stratosphere on nothing but hype and wishful thinking.

This rally can end just as quickly as it started. Of course, no one knows if this is the beginning of the end of the trend, which is why we use our trailing sell stops to get back to the sidelines. Volatility was high this week, as it usually is when markets are near inflection points. I expect this to continue until either the uptrend resumes or a new downtrend is established.

Our Trend Tracking Indexes (TTIs) headed south as well and have moved closer to their long-term trend lines, but they still remain in bullish territory by the following percentages:

Domestic TTI: +6.63%
International TTI: +10.97%
Hedge TTI: +0.09%

Thursday's initial excitement about the GDP growth of 3.5% seems to have waned since most of it came from government spending. The cash for clunkers program was a temporary shot in the arm but, with consumer spending falling 0.5% in September (the biggest drop in 9 months), it's becoming clear that the consumers have tightened their wallets.

That of course will do nothing to help an ailing economy on its feet where consumer spending accounts for 2/3 of GDP. Adding more pain to the story is lack of income-growth, which makes me wonder where a sustainable economic rebound is coming from.

Next week, the markets will be facing more headwinds in form of a Federal Reserve meeting and the all important unemployment report next Friday. It promises to be another week where anything is possible.

Until next Friday,

Ulli...

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Until next week.

Ulli...

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Ulli G. Niemann
Registered Investment Advisor
714.841.5804 Toll free: 866.580.6764
http://www.successful-investment.com
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