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Dow Breaks Even — What About You?

While stocks rose on Friday,  sending the Dow Jones Industrial Average into positive territory for the year, many investors were still in the red — and seeking new answers from financial advisers.

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The Dow finished up 166 points, up 5% for the week and marking three straight weeks of gains — the index’s longest weekly winning streak in six months. Markets were boosted late in the week thanks to better-than-expected retail sales and an impressive earnings report from Google. And while historically, October has been one of the bumpiest months of the year — it claims eight of the 15 biggest single-day drops in the Dow’s history, but also five of its seven best-performing days — so far this month it’s up 6.7%.

The Dow getting back into the black is a mini-milestone for many investors, but stocks are still down more than 6% from July — before the recent market turbulence. And some financial advisers say many of their clients are still trying to recover their summer losses. Since August, the market has closed up or down by 200 points a remarkable 19 times. Many advisers and investors were caught on the wrong side of those moves – moving to cash as the market rose, or buying shares before a major drop. “It’s a more damaging environment than what just the Dow might be indicating,” says T. Doug Dale, a financial adviser with Security Ballew Wealth Management in Jackson, Miss.

To be sure, some advisers say their clients are back in the black, too — if barely, and not thanks to stocks. Dale says the long-term Treasury bonds he bought and sold for clients during the third quarter helped boost investor portfolios by about 5%, which made up for the 4% dive in their stock portfolios.

Other advisers see the current rally as a sign of things to come. Frank Fantozzi, president of Planned Financial Services, a wealth management firm in Cleveland, says he’s been increasing his client’s exposure to stocks by 15%.  “My feeling is the equity side of things will be positive,” says Fantozzi, who says returns for his clients’ portfolios are flat for the year.

Indeed, if history’s any guide the year could finish on a high note, say advisers. Called “the Santa Claus” effect, stocks historically rise in the fourth quarter — especially following a down third quarter. In years where the Standard & Poor’s 500 index has dropped by 10% or more in the third quarter – as it did this year with a 12% drop—the index has gained an average 7.2% in the fourth quarter, according to Standard & Poor’s Equity Research.

But other advisers are playing defense. Financial adviser Mathew Tuttle moved his clients out of equities at the beginning of August, and into cash and long-term Treasury bonds. He benefited when long term Treasurys rallied in September but has been losing money as Treasury yields have come back up this month. He has also missed out this month’s stock market gains. “We’re going to take risk off the table in a period like this,” says Tuttle, adding that he doesn’t believe the European debt crisis is close to being resolved. “We’ve taken volatility off the table.”


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    • You Are Here – October 19, 2011
      by Slipposlappo

      The SP500 Index: consider this the baseline. Do it.

      Sick yet? One cannot help but look at the charts and see a confused market that is bi-polar at best. The good news is that the SP500 Index is still above the 50 Day Simple Moving Average and has even brought the 10 Day Simple Moving Average with it. At today’s close, the SP500 Index is finding immediate support at the August 17, 2011, high of 1208.47 and the September 08, 2011, high of 1204.40; both of which were formed on the low 3 Billion volumes. Should that break, the next support is at the 10 Day Simple Moving Average at 1198.25. Either way, there is some decent support at ~1200, but this market is not known for its timidity. Should that support break, the SP500 Index will likely just continue downwards to the 50 Day Simple Moving Average around 1175.41, which now has a positive slope for a change! It’s not extremely positive that the world seems to be on the edge of the abyss daily, but it is positive that the SP500 Index is still above the 50 Day Simple Moving Average and the 50 Day Simple Moving Average is still trending upwards now. Factually, these are the first events that would need to occur in order for the SP500 Index to recover higher. On the upside, there is mild resistance at 1220.39, which was established on September 20, 2011, on 3.00 Billion volume. With increased volume on the up days for the SP500 Index, this resistance should be easily surpassed. The more significant resistance will occur at 1230.71, the August 17, 2011, high that was established on 3.02 Billion volume. This resistance is emphasized with the October 18, 2011, high of 1233.10 established on 3.93 Billion volume. To add just one more wall to smash through, this resistance will be further enforced by a falling 100 Day Simple Moving Average at 1234.32. Remaining bold in predictions, the SP500 Index will likely test the 50 Day Simple Moving Average, find support, and then travel upwards again to the 100 Day Simple Moving Average; this all being executed so that it can test the slightly downwards sloping 200 Day Simple Moving Average and bring some resolution to if we’re out of the woods or if the woods are on fire.


      The macro-economic picture remains bleak, but the market may be safer than initially meets the eye because of that very reason. Every up and down day seems to hinge on the leaks emanating from behind the doors of central banks, and that says a lot. That tells the average investor that their financial future has very little to do with anything real and has more to do with the unreal and intangible stimulations executed by central banks. This will be discussed more in a future article, but debt has never done anyone, or more importantly, any government any favors; for that reason, debt will be inflated away. Everyone looks at the Eurozone as a failing economic entity, but the truth is that it is a thriving political entity. The mere fact that so many nations can even agree to vote on a common piece of legislation is incredible, especially for a region as fractured as Europe with so many populations that don’t even speak the same language. Try to imagine Arizona, New Mexico, Texas, and California even agree to bring a single piece of border legislation to a vote simultaneously, and then through political maneuvering force a unanimous vote for or against the issue. Impossible, yet residents in these states even speak the same language (Texas vs. California debatable). Due to the massive political success of the Eurozone, the region and its currency will likely become even closer than its members find to be comfortable. Either way, governments started running the show once they nationalized corporate debt. Everyone keeps looking at corporations and consumers strictly out of habit as if they matter at all. Look around, nothing real has mattered for a long time. Attacking my own methods, the very basis of technical analysis is that it once provided clues about real trends for the little investors that were not able to afford massive research budgets or insider information afforded to the big firms. Now technical analysis is nothing more than tracking and trading the trends that are being followed by other people doing the exact same thing. The entire process of making a trade nowadays is the equivalent to a sandwich eating itself. Clearly, this is not real. In the world of all things not real, especially trillion dollar nationalized debts incurred by unpaid future mortgages and their aggresively traded derivatives, the only entities capable of bringing enough imaginary firepower to bear are the governments themselves. If ever there were a more useless and self-imposed imaginary set of restraints society put upon itself, government tops the list. We’re all mimes stuck in an invisible box: complete idiots, Slipposlappo included. Cheers!

    • I’m up about 7 percent for the year across all my accounts. The market was going up fast early in the year and we had Europe coming along with the debt limit vote and I figured I had made enough for the year and with all the risk I started pulling my money out. I’m sitting on about 95% cash. It’s looking less likely we are going into recession now but Europe is still too risky for my money.

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