Good morning everyone ...
In checking the futures this morning, as I write, the S&P 500 Index is in the green followed by Greater Europe also being up ... but, Greater Asis seems to have tanked.
In my recent study for earnings in the S&P 500 Index Fourth Quarter 2015 earnings projections are where I am finding a reversal in the decline that took place throuh much of 2015. If so, we will soon be finding this out because earnings reporting season begins today. I am thinking somewhere through this reporting season the markets will begin to turn upward and we will have a nice stock market rally that perhaps last up to and on through spring. Expect some bumps along the way.
With this, I bought a little Friday rounding up a position in my global equity sleeve. Should the markets respond in like step I'll be buying a little at a time as they recover until they become too pricey for my taste or I have completed my target buys. According to the most recent Xray analysis my portfolio currently bubbles a little below its neutral position in equities due to the recent sock market sell off.
Have a great day.
Old_Skeet
Comments
Not much has changed from yesterday ... so I extended the title line to include day seven.
In checking the S&P 500 futures this morning I am seeing green along with Greater Europe also being in the green; however, Greater Asia is in the red.
I am still with my thoughts as we move through earnings season things will improve in the markets. I am expecting the year-over-year numbers for Fourth Quarter to be down but ahead of the Third Quarter numbers. With this, I am thinking earnings will be trending upward as we move through the year providing fuel for the markets to build upon thus moving upward. Also, I look for some rough patches along the way ... this downdraft being one of them.
Understand, big money needs some movement in the markets from time-to-time for them to make money as they play the downside movement as well as its upside movement. So when the markets have become pricey some selling takes place ... and, since there are more sellers in a falling stock market than buyers prices pull back to a level where new opportunity levels are found then buyers emerge. Most retail investors, like myself, only engage the upside. This is one of the reasons I carry a sizeable amount of cash in my asset allocation so I can play a rebound after big money has prehaps driven the markets down to new opportunity levels.
Not knowing where an exact bottom is I generally will average cost in once I believe good value can be had. This is done over both a time spread and price movement in the market. An example, last week I bought a little with a 500 Index price reading of 1922 (1st buy step). This week I may, or may not, buy again if the Index's valuation has not moved much. If it has dropped to another predetermined buy level I'll buy again and perhaps repeat again if prices continue to fall. I also have down and up buy steps. If prices start rising from my first buy step, I do nothing. When equities become overweight within my asset allocation due to their rising price and have become overbought, by my thinking, I'll sell some off and raise my allocation to cash.
For those that want a fund that does this automatically you might wish to look at CTFAX. It is a fund that I hold in the income area (hybrid income sleeve) of my portfolio because it usually holds more bonds than stocks but loads stocks during a market pullback and then sells them off as the market rises and reloads its cash or bond holdings.
Have a great day; and, most of all I wish all ... "Good Investing."
oilprice.com
In this week’s newsletter, we will take a quick look at some of the critical figures and data in the energy markets this week. Oil regained a bit of lost ground on Tuesday morning, but is now dangerously close to dipping below $30 per barrel.
The WSJ published a nice analysis http://www.wsj.com/articles/why-chinas-market-illness-has-gotten-more-contagious-1452540479 of the far-reaching of effects that China’s current economic situation is having – pushing down currencies around the world, depressing commodity prices, and slowing global trade. In other words, China’s turmoil raises the possibility of economic contagion.
With that backdrop in mind, crude oil has declined rapidly, and a price with a 2-handle is no longer a remote possibility. Goldman Sachs made the largest splash last year when it predicted $20 oil, but now other investment banks – including Morgan Stanley and Citigroup – are jumping on board with the bearish predictions. Unlike some of its peers, Morgan Stanley pinned much of the decline in recent months on the strong U.S. dollar. According to Wolfe Research, around one-third of U.S. oil and gas producers could be forced into bankruptcy by mid-2017 if oil prices remain low.
The ruinous prices have opened up the possibility that OPEC might call an emergency meeting, ... UAE’s oil minister, Suhail bin Mohammed al-Mazrouei, responded to the reports by saying there was no need for such an “artificial move” to rescue prices. “I think the strategy is working,” he added. Moreover, with tensions flaring between Saudi Arabia and Iran, is not obvious that the group can even work together.
...In its January Drilling Productivity Report, the EIA expects oil production from the major U.S. shale regions to decline by 116,000 barrels per day in February, the same drop off that it projected for January. The losses will come largely from the Eagle Ford, which is expected to lose 72,000 barrels per day. The Marcellus Shale, the largest source of shale gas production, is also projected to see a decline of natural gas production by 225 million cubic feet per day.
http://oilprice.com/newsletters/free/opintel112/01/20162012016
http://oilprice.com/Energy/Energy-General/Bearish-Sentiment-Takes-Complete-Hold-Of-Oil-Markets.html
Hard to see how that is going to change, at least for the next few years. BTW, there's an extensive article in this week's Economist which explores the entire subject of Saudi Arabia's immediate future. Presently they are drawing down their extensive financial reserves to maintain peace within the country, but that cannot go on for more than a few years at most. An attempt at major internal changes, engineered by the young (30) prince Muhammad bin Salman is already well underway. Because of the current increase in enmity between Saudi Arabia and Iran there is at this time virtually no chance of any OPEC agreement to restrain production.
Well the second part is in place. New opportunity unveiled by today's carnage. But, don't know about the rebound part. Much of the air appears to be let out of the old bouncing ball.
Thanks for making comment.
Jeffery Saut of Raymond James believes we are now in a selling stampede which usually last from 17 to 24 market sessions. Since we are, according to him, only in day twelve of the stampede ... it's buckle up time as we still have a ways to go by his thinking. And, yes I have been buying a little in my global equity sleeve at the 1922 & 1880 mark thus far on the S&P 500 Index. Year-to-date I am showing the Index to be down 8.0% while I am down 3.8% and the Lipper Balanced Index is down 4.8%. The 500 Index is now down about 12% from its 52 week high.
Mr. Saut believes it usually takes up to four to five possibly six times as long to recover from a stampede than it lasted. Since we are now in day twelve it could take up to a couple months, or more, for the markets to recover if the stampede ended here (which I doubt that it will). I still see a rally coming ... especially if the fed backs down on increasing interest rates. I just don't know when the rally will start nor do I know when the downdraft will end. Therefore, I'll continue buying at predetermined price levles on the way down and perhaps a few stops after the bottom on the way back up.
This is a strategy I learned from my late father and one he used throuh the years. It is probally not for everyone's style of investing but it has worked for my family through the years and one I employ today. It is not a fast moving strategy because one needs to start moving to cash in baby steps as stocks start reaching new 52 week highs and then start buying in major corrections to reload equities within their portfolio. Then begin selling equities off as they appreciate again reaching 52 week highs or become overweight within ones asset asset allocation.
Again, this is not a fast moving stratey as it takes some time to go full cycle with it. I started off loading equities within my portfolio back in early 2014 and raised my cash from 10% to now about 25%. Now that stocks have entered correction territory I have begun to buy again. When they recover and my portfolio becomes overweight in equities due to their appreciated valuation I'll being the proccess again and sell some off, in baby steps of course, and begin to reload my cash allocation.
Thank you for your question. It is about one half of one percent for each buy step of the portfolio's overall valuation. Since, I am about 50% in equity this is about the same as raising my equity allocation by about one percent with each buy. Remember, we have been in a down draft and my equity valuatons have been in decline; and, these buys help keep the allocation close to its target of 50%.
With half a percent movement at 25% cash, you seem to planning on around 30 milestones from here to the bottom and up to the next top for a target of 10% cash when you start to sell again. Thee have been two milestones so far.
The current method that I have referenced comes from a strategy my late father use to use. He'd start buying once stocks pulled back to where he would be happy with them if he had to hold them for an extended period of time. He usually bought good dividend payers many times a Dog of the Dow stock. In this way he collected dividends, some times above what savings accounts were paying, while he waited for valuation recovery. When recovery came and he had reached his capital appreciation mark he would begin to trim his position(s) and book the gains.
Currently, I have no special investment positions as I have targeted a few current positions that I'd like to build upon within their respective sleeve; and, I will be happy in keeping them for the long term thus collecting the dividends they provide. Should the markets continue a down draft I'll continue to buy select positions, in this fashion, with the thought to hold them for some time to come.
Most likely, the special investment positions will be purchased during the up swing with the thought they will be the first ones to be sold during rebalancing thus keeping the others for a longer period of time. And, yes I have sold off some positions that I'd like to have kept but had to do so in the rebalance process to bring equities inline with their targeted allocation.
I hope the market does not drop the full 30 mile stones that you computed my open to buy to be. After all I did not start buying until the S&P 500 Index has pulled back 10% to around the 1920 mark; and, then add 30 mile stones at about 50 points each would be another 1500 point drop putting a reading of around 420 on the Index if all 30 buys were deployed in the down draft. Remember, I need some to deploy on the up swing.
A simple strategy that sometimes takes a few years, or more, to cycle.