Red Flags Flying

Wall Street Sector Selector Review            Sector Selector Update June 15, 2008   Current Positions:   Entry Date:     Positions:          Profit/Loss%       5/26/2008:           Pos#1:                       +4.8% 5/26/2008:           Pos#2:                       +8.3% 6/9/2008:             Pos#3:                        -2.5% Cash Cash       Year To Date:   Wall Street Sector Selector:     +7.4% S&P 500:                                        -7.4%   All profit/loss figures include realized/unrealized gains/losses and do not include taxes, commissions or dividends   Join Now            Greed and Fear Index     Red flag is flying   Bears in control.   We can expect declining prices.   Possible strategies include raising cash, bearish options strategies, tighter stop loss points, inverse Exchange Traded Funds.   Wall Street Sector Selector strategy is to buy sector ETFs that have potential to outperform S&P 500 regardless of market conditions.     Duration of “red zone” is unknown; flag will switch to yellow or green when greed comes back into the marketplace.       Red Flags Flying   Dear john    Our general market indicators continued turning down this week and now we have entered the “red zone” where risk outweighs reward and fear rather than greed controls the markets.   On Monday, June 9th, we exited United States Oil with a realized profit of +16.6% in 5 weeks and we closed our Brazil Index position with a profit of +8.0% in 6 weeks.     For the week, our portfolio was -0.6% and we were stopped out of our Gold position for a -5.6% loss.   Year to date we are +7.4% compared to the S&P 500 at -7.4% and we will continuing shifting the portfolio towards a more bearish stance.   We expect oil to retrace downwards in the short term and will look for a place to reenter before the next wave up while the International arena appears to have entered a sustained downturn.       The View from 35,000 Feet   After last Friday’s 400 point selloff on the Dow, the markets struggled to regain ground this week but were unable to move ahead, finishing at almost exactly the same level as last Friday.   This is an ominous development because oil was down 2% for the week and the dollar was stronger and both factors should have strengthened the general equities markets.   On Friday, the Consumer Price Index registered a +0.6% increase for May which was the fastest pace in 6 months and the index is now up 4.2% year over year as the cost of oil seeps into the whole economy.  And gas prices hit a record nationwide average of $4.06/gallon as the summer driving season goes into full swing.   Also on Friday, the consumer registered his unease with general economic conditions in the latest University of Michigan Consumer Confidence Index which came in at a 28 year low.   Looking ahead, we are now in the seasonally unfavorable six months of the year, and combined with our “red zone” alert, expect a downward bias to the market in the near to intermediate term.   Inflation is picking up and the Fed seems to be switching its bias towards raising rates with inflation now being a larger concern than recession, and the futures markets have factored in 2-3 rate hikes before the end of the year.   Rising interest rates are never good for equities and this reinforces our view of further declines between now and the election.     The Week Ahead   A relatively quiet week ahead on the economic front but with some important reports from the housing sector:   Monday: Empire State Index for June; June Homebuilders Index    Tuesday: May Producer Price Index, May Housing Starts, May Industrial Production   Wednesday:June Philadelphia Federal Reserve Report, May Leading Economic Indicators    Sector Spotlight   Weekly Leaders:   Agriculture, Commodities, Bullish Dollar   Weekly Laggards: Financials, Home Builders, Gold, Banks   Summer has finally come to Bend and we’re taking our RV out of mothballs and heading up to South Twin Lake, a beautiful spot in the High Cascades, for a weekend of R&R (finally) after several weeks of heavy travel.   With gas at over $4.00 in town, I’m happy that the lake is only 40 miles from home.   Wishing you a great weekend wherever you may be.   Your partner in prosperity, John John Nyaradi Publisher Wall Street Sector Selector     Join Now