The Weekly Predictor Updated November 6, 2009

More than 190,000 jobs were lost in the most recent reporting period bringing total unemployment to 10.2% a 25-year high.  The good news is that consumers continue to pay down their debt.  Traders shrugged their shoulders at those unemployment figures helping the S&P 500 post its fifth daily gain in a row.  The 3.2% gain for the week helped the fabulous five hundred climb back to safety above its 50-day moving average.          

The Daily Predictor, for short-term traders, fired off a Buy signal on that big white candle as the Summation Index continued to paint its red Sell signal.

You can clearly see where buyers stepped in at 73 on the Bullish Percent Index. 

Profitable Investing is all about the entry.  To maximize profit, you have to master the fine art of the entry.  Buying at any old-time will not work.  Brokers get paid when you buy something so they put your money to work at all the wrong times.  That is a very good reason for you to Manage Your Own Money.  A good trading system is all about the entry.  Buyers proved once again they do hang out at that 50-day moving average.  

Thanks for checking in and I’ll talk to you next week!

Dan Clemons author Manage Your Own Money

This video shows The Predictor trading JNJ:

http://www.youtube.com/watch?v=cNk7Et2G1TM

This Video discusses 10 things every investor should know:

http://www.youtube.com/watch?v=Omg9ymZAJ6k

S&P 500 Predictor and Summation Buy and Sell History

Special note:  Summation Buy and Sell signals are not valid when the market is Trending.

Predictor Sell on October 20, 2009

Predictor Sell on October 1, 2009 - Predictor and Summation Buy on October 8, 2009

Summation Buy on July 9, 2009 - Summation Sell September 22, 2009

Predictor Buy on March 11, 2009 – Predictor Sell on June 1, 2009

Predictor Buy on November 24, 2008 – Position Closed by Summation Sell on January 13, 2009

Predictor Buy on July 21, 2008 – Position Closed by Summation Sell on September 9, 2008

Predictor Buy March 17, 2008 – Predictor Sell on May 20, 2008

Bonding With Bonds November 6, 2009

Refinancing has gone full circle.  First it was distressed homeowners and now it’s corporation’s scurrying to deleverage their balance sheets.  Companies are asking the people who lent them money, bondholders, if they would take less to be paid off now rather than wait to maturity.  Bonds are being called in right now because smart CEO’s know they can refinance their loans at current super low-interest rates. 

Interest rates on the 10-year Treasury Note closed the week at 3.57% UP from 3.41 last week.

 

Bonds are still Priced For Perfection so the interest rate spread does not favor High Yield bonds.  I bought a 3-week CD last week with a 2% yield to maturity net.  It sounds like a lot but in 3-weeks it only amounted to a little over $50 net of commissions.  I’m not willing to go any further out than June of 2010 at these low rates.  Bond investors know it is wrong to buy above par.  It’s a sign that interest rates are too low.    The bottom line is I just can’t convince myself that locking up a 3% CD for the next two years is in my best interest.  Likewise, high yield bonds don’t look attractive to me at 4.5% either.  The risk reward spread is too narrow.  Cash is king in my opinion.

Bond investors require fair and accurate pricing in order to make smart decisions about their money.  Listed bonds are more accurately priced than non listed bonds where broker dealers set the price.  Dealers do like to price risky bonds near par in order to get them sold.  If risk is priced into the asking price bond investors won’t buy them.  See the problem?  This is a good time to raise your bond ratings to BBB- and higher.  Stay short and error on the side of safety.

I won’t invest in a bonds listed over the weekend on the Bond Desk.  Sellers lower yields hoping to pick up a bid over the weekend.  That spells less yield to you and a higher bond price for the seller.  The second tip is the best time of day to look for bonds and that is between 1 pm and 3 pm Eastern. 

How much money to allocate to individual bonds and how much money to allocate to bonds maturing in years 1, 2, 3, and 4 can be found in my book Manage Your Own Money.  

My current bond trading strategy looks for Investment Grade Corporate bonds maturing in 18-months or less.  I look for bonds that are mispriced giving me a higher yield to maturity than another bond of the same issuer maturing within a few weeks of each other.  Don’t forget that short maturity’s reduce risk more than any other measure.  It is always smart to avoid companies on Credit Watch.  Staying well diversified, limiting the number of bonds invested in any one company, and checking with Moody’s before making a purchase will add confidence to your trade.  Since bonds are backed by shareholder equity, it is smart to require a share price of $10 or more!  Here is a short video showing bonds available on the Bond Desk:

http://www.youtube.com/watch?v=rEj68ZZGwTw

The most bond friendly broker dealer is named in my book Manage Your Own Money.  All royalties are used to care for sick and injured animals from the wild.  Who will care for them if we don’t?      

With warm wishes,

Dan Clemons author Manage Your Own Money

Authors Note: November 4, 2009

All royalties from the sale of Manage Your Own Money are donated to charities that provide care for sick and injured animals from the wild both sea and land.  Our last quarterly donation went to the Rogue Valley Humane Society here:  http://roguevalleyhumanesociety.org/.  Thank you for helping to support this very worthy cause.

Daniel J. Clemons author Manage Your Own Money

To watch a short video of Dan Clemons describing how to manage a 401k plan click here:

http://www.youtube.com/watch?v=UfSQY-JlEWs

To read what others are saying about the book, click here:

http://www.amazon.com/gp/reader/1439202117/ref=sib_dp_ptu#reader-link

To put The Predictor on your desktop click here:

http://www.amazon.com/Manage-Your-Own-Money-professional/dp/1439202117/ref=sr_11_1?ie=UTF8&qid=1221072523&sr=11-1

Want an Exit Strategy to avoid corrections and bear markets?  The Predictor guides the investor in and out of positions with precision.

Post Your General Questions and Comments about Money

Everything that is super important for you to know about money is included in my book, which you will find on sale for $26.60 right now at Amazon.com a 21% discount!  

With very warm wishes,    

Dan Clemons author Manage Your Own Money

Important Disclaimer

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. Prices, values, or income from any securities or investments mentioned on my blog may not be in the best interests of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate. Where an investment or security is denominated in a different currency to the investor’s currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. The information contained on these pages does not constitute advice on the tax consequences of making any particular investment decision. This material is not intended for any specific investor and does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you. Before acting on any recommendation on any material presented, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. 

Chart of The Week – Updated November 6, 2009

Take a look at these two funds on the chart below.  It looks like one fund is making money while the other one is losing money.  It also looks like if you owned both funds at the same time, you would make no money at all.  They seem to look like they move just the opposite of each other.  How could Wall Street get two funds that perform exactly the opposite of each other?

 

Both funds are the S&P 500.  One is a long position, which is the solid line.  The other is shown in candlesticks and is a short position.  Mutual funds are not easy to manage because they have early redemption fees and then there are taxes to consider.  So, how do you protect a portfolio when the market trend is down?  You can purchase SH an ETF that holds a short position in the S&P 500.  At sell signals, rather than sell something, a portfolio can be shifted into neutral by simply adding SH.  Results will vary depending on the size of the portfolio and the amount of the short and how well the investments in the portfolio correlate with the S&P 500.  Please read the Disclaimer above before investing in anything you read about on this blog.  I would like to thank my good friend Chip Anderson at Stockcharts.com for the use of his beautiful charts in my book and here on my blog.