Greed and Fear Index
Yellow flag is flying.
Fear is re-entering market.
Expect sideways or downwards prices
Possible strategies include raising cash, bearish options strategies, tighter stop loss points.
Wall Street Sector Selector strategy is to buy sector ETFs that have potential to outperform indexes.
Duration of caution is unknown. Flag will switch to green or red whenever greed or fear take total control.
We made some nice gains this week as the markets experienced an intense sell off on Friday. Our portfolio gained approximately 4% on the week compared to -3.5% for the Dow and -2.9% for the S&P 500.
A very intense tug of war between bulls and bears over the state of economic growth and rising inflation is playing out and the bears won this week with the record spike in oil.
The View from 35,000 Feet
Friday was a record setting day as the Dow lost almost 400 points, its 8th worst drop since 1985, and shed 3.5% for the week.
Unemployment spiked to 5.5%, the highest since October, 1984, and the biggest monthly gain since 1975. Oil surged to an all time high price of $139/bbl and was up $11 on Friday, the biggest one day gain in history, and enough to cause a mid-day trading halt.
Action was spurred by Israel and Iran talking tough, Morgan Stanley forecasting $150/bbl by July 4th, and the fact that there are only 2 million “spare” barrels per day available in the world.
Overall, it was a breathtaking day and I’m happy, of course, that we were on the right side of these dramatic moves.
Looking ahead, expect more volatility as this global drama continues to unfold. One has to conclude this is looking more and more like a recession, and coupled with the higher inflation signals coming from oil, gold and commodities, leaves the economy between a rock and a hard place.
The Week Ahead
Another busy week of market moving reports:
Monday: April US Pending Home Sales
Tuesday: Weekly Retail Sales
Wednesday: Federal Reserve Beige Book Report
Thursday: Weekly Jobless Claims, May Retail Sales, April Inventories
Friday: May Consumer Price Index, June Consumer Sentiment
Weekly Leaders: Oil, Agriculture, Commodities, Precious Metals
Weekly Laggards: Financials, China, Banks
I’m in Omaha this weekend with my son for a US Swimming Grand Prix meet and a tune up for the Olympic Trials. He had a great race in his best event, the 200 Breaststroke, and made Championship Finals, finishing 7th overall, the youngest guy in the Top 8, so he was happy with that.
Omaha is a great place, salt of the earth people, great steaks and a vibrant downtown anchored by the new Qwest Center where the swimming is happening. The downtown was dying a few years ago and its rebirth is a great example of how vision coupled with reinvestment can yield impressive results.
So, it has been a good weekend, even though I didn’t get invited out to Warren Buffet’s house.
Wishing you a great weekend wherever you may be.
Your partner in prosperity, John
John Nyaradi Publisher
