2010 was entered with optimism for the market to continue the recovery which started in March of 2009. This optimism was short lived as the market reversed downward after reaching a high for the year on Jan. 19. Over the next 13 trading days the S&P 500 index lost almost 10% of its value.
During this downturn my key indicators showed early warning signs for a sustained downtrend. This signaled a defensive investing strategy which was implemented by tightening stop loss orders and selling selected mutual funds that crossed below critical support levels. International Exchange Traded Funds and International Mutual Funds were liquidated since this equity class's relative strength reversed down after leading the market up since march of 2009.
This past week the major indexes all posted their first weekly gain in 5 weeks. Although this is a positive sign it is too early to switch from a defensive to an offensive investing strategy. New positions will not have market momentum behind them to improve their chances for success. Therefore, any new trades must be accompanied with tight stops to limit risk.
Holders of mutual funds in 401(k) retirement plans are best served by keeping the money from recent sales in a Money Market Fund. If and when the indicators signal an offensive strategy, the money will be used to invest in the available mutual funds that are leading the market up.
Showing posts with label risk management. Show all posts
Showing posts with label risk management. Show all posts
Saturday, February 13, 2010
Friday, November 13, 2009
Introduction
This blog is being started to give you a brief overview of recent developments in the market and how they may effect your portfolio. New entries will be posted approximately once per month .
Currently the S&P 500 (the most commonly used benchmark to determine market position) is recovering from a decline in late October and is at its highest point for this year. However, it is still approximately 30% below the high point in October 2007.
The activity in late October this year triggered signals to be more cautious and reduce risk. This is done by setting minimum price levels and then paring back or closing out the weakest performing issues when they go below these levels. Funds generated from these sales are kept in money market accounts until the indicators reverse up and call for a more aggressive investing approach.
Preserving and protecting your assets is the first priority of my advisory service. The actions I took to establish alerts to sell assets were put in place to protect your portfolio from the major losses that can take years to recoup. (The market decline of 58% from Oct. 2007 to March 2009 is a recent example.) Most of the alerts levels were not violated and so only a limited number of sell orders were implemented. Although the market has moved up since the beginning of Novermber and is making new highs, key risk management indicators show that it is still not time reinvest the funds from those sales.
You will hear from me, individually, when investment action needs to be taken.
Currently the S&P 500 (the most commonly used benchmark to determine market position) is recovering from a decline in late October and is at its highest point for this year. However, it is still approximately 30% below the high point in October 2007.
The activity in late October this year triggered signals to be more cautious and reduce risk. This is done by setting minimum price levels and then paring back or closing out the weakest performing issues when they go below these levels. Funds generated from these sales are kept in money market accounts until the indicators reverse up and call for a more aggressive investing approach.
Preserving and protecting your assets is the first priority of my advisory service. The actions I took to establish alerts to sell assets were put in place to protect your portfolio from the major losses that can take years to recoup. (The market decline of 58% from Oct. 2007 to March 2009 is a recent example.) Most of the alerts levels were not violated and so only a limited number of sell orders were implemented. Although the market has moved up since the beginning of Novermber and is making new highs, key risk management indicators show that it is still not time reinvest the funds from those sales.
You will hear from me, individually, when investment action needs to be taken.
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