Dynamic Growth ETF Portfolio
NEW BUYS:
None
NEW SELLS:
None
SWITCHES:
Back to Top 10:
EWM: MSCI Malaysia (Free) Index- .507
To Honorable Mention:
OIH: Oil Services HOLDRS- .373
Here are our Top 10 ETF's for the week of October 29th:
1) PGJ: PS Golden Dragon China Fund- .801
2) FXI- iShares FTSE/Xinhua China 25- .788
3) EEB: Claymore ETF BNY BRIC- .639
4) ITA- iShares DJ Aerospace & Defense-.589
5) IAH- Internet Architecture HOLDRs Trust-.554
6) IXP: Telecommunications Sector Index Fund- .550
7) PPA- PS Aerospace & Defense- .519
8) EWM: MSCI Malaysia (Free) Index- .507
9) EWS: iShares MSCI Singapore (Free) Index Fund-.474
10) IHI- DJ Medical Devices- .381
Honorable Mentions:
OIH: Oil Services HOLDRS- .373
The Week in Review:
The stock market closed the week on a strong note as earnings from Microsoft (MSFT) and reassuring comments from Countrywide Financial (CFC) helped to drive the markets higher.
Countrywide, the biggest U.S. mortgage lender said it would return to profitability in the fourth quarter of this year. The Countrywide news also helped to spark a rally in the extremely oversold financial sector. Many high quality bank stocks reversed an ugly downtrend to close higher on the day.
Merrill Lynch closed up 5.19 at 66.09, its biggest gain in five years, after reports that chief executive Stanley O'Neal will lose his job. Merrill Lynch took an $8.4 billion write-down from losses incurred in collateralized debt obligations (CDOs).
Treasury Secretary Henry Paulson is trying to create a $100 billion "superfund" to help banks with their credit problems, and investors began fleeing stocks of many U.S. banks in fears that more bad news is in the cards.
Energy stocks reversed their brief downtrend as the price of oil briefly broke above $92 per barrel for the first time ever. On top of all of the supply and demand issues, the US has to contend with a Turkish invasion in Northern Iraq, as well as the new sanctions placed on Iran.
Gold was higher as the dollar dropped to a record low versus the euro. Expectations remain that the Federal Reserve rate will cut interest rates next week.
The Fed's stance on inflation is based on the CPI data, and frankly, the Gold, Energy, and Currency markets are signaling that the data is no longer an accurate measure of inflation.
In any event, the FOMC meeting Oct. 30/31 is expected to result in a 25 basis point cut in fed funds rate.
Economic News
Durable goods orders fell 1.7% in September, which gives the Fed ammunition to cut interest rates next week. In addition, existing-home sales fell by 8%, a bigger decline than the 4.5% analysts had expected.
The University of Michigan's final consumer sentiment index for October fell from the preliminary reading.
Here is an economic and market report on the global markets by Econoday.
Here is the US Economic Calendar for next week.
Relative Strength Index (RSI)- Stocks Oversold/ Overbought
The RSI indicator (below 30) is a good source of finding stocks that are over-sold and due for a rally, as well as stocks that are over-bought (over 70) and due for a decline.
Here are some oversold stocks to consider- RSI Stock Blog
For the Week:
The Market Volatility Fear Index (VIX) fell to 19.56 from 22.96 last week but still up from 17.73 two weeks ago.
The CRB- Commodity Index closed at $450.00 down from 450.56 last week, and up from 446.44 two weeks ago.
Gold closed higher reaching $787.50 after closing the week before at $768.6/oz, and $753.80/oz two weeks ago.
NYMEX crude oil closed the week at $92.74 up from $86.95/bbl last week, and $82.74 two weeks ago.
In Conclusion
Its become clear that the housing market is having an adverse impact on consumer spending. The hype surrounding the expected mid-October cycle may be met with disappointment since consumer discretionary spending has been a disappointment.
Here is a list of retail stocks that have been hammered since April 20th- Source- NYTimes & Bloomberg.
Clearly, the impact from housing, higher energy prices, and poor consumer sentiment are weighing in heavily.
My best guess from here is the market will attempt another run back to the all-time highs. If the Christmas selling seasons turns out to be a bust, it will be bombs away for the stock market.
Our best approach going forward is to take profits into the upcoming rally.
In the mean time,
Our current asset allocation is as follows;
70% Equities: (Normally 95%) Aggressive
60% Equities: (Normally 80%) Moderately Aggressive
50% Equities: (Normally 60%) Moderate
30% Equities: (Normally 40%) Moderately Conservative
15% Equities: (Normally 20%) Conservative
At Dow 14,500, S&P 1575, we will reduce our allocation models by 5% to;
65% Equities: (Normally 95%) Aggressive
55% Equities: (Normally 80%) Moderately Aggressive
45% Equities: (Normally 60%) Moderate
25% Equities: (Normally 40%) Moderately Conservative
10% Equities: (Normally 20%) Conservative
