Even with the Fed trying to cut back on their stimulative efforts, U.S. investors
are still being impacted by talk of new programs in China and Europe. From CNBC:
In a speech reported by state media on Friday, China's premier indicated
the Beijing government was prepared to take action to bolster the world's
second biggest economy, saying the government would gradually roll out
targeted measures to help economic activity. And on Wednesday, Germany's
Bundesbank said the ECB could buy loans and other assets from banks to
support the euro-zone economy, with the statement marking a dramatic departure
from its previous stance on the policy.
Debt: A Recurring Theme
Europe is still trying to stimulate their way out of a debt crisis. China
is worried about loans made against frothy real estate. Back home in the U.S.A.
we have similar concerns. From Yahoo
As of March 2014, American consumers owe $11.52 trillion in debt, an
increase of 1.6% from last year. The average household owes $7,115 on their
credit cards and the average indebted household owes $15,252. Americans
owe $8.05 trillion in mortgages (the average mortgage debt being $152,209)
and $1.08 trillion in student loan debt. When combined with corporate debts
the U.S. collectively owes about $28 trillion in private debt.
Investment Implications - Let The Game Come To You
We have been talking about S&P 500 levels 1,844 and 1,848 longer than
any investor or trader would care to admit. For the record, those levels have
been relevant for three months. Based on our master market
model reading during Friday's trading session, stock bulls continue to
maintain a slight edge over stock bears. The tweet below sums up the current
state of affairs:
Do it yourself investors and traders tend to be "hands on, I am going to make
something happen" people, which can lead to overtrading. A blurb from the Point
Of The Game reminds us of the value of patience during periods of indecisiveness
in the financial markets:
How many coaches have counseled anxious and pressing players, "let the
game come to you." It's hard advice, even odd advice in a world of sports
and professions where aggression and taking control are the preferred strategies. "Getting
there first" or "controlling the tempo fly" in the face of this disciplined
approach. Yet this sage advice matters profoundly for successful athletic
and professional endeavor. Let the game come to you, however, takes strong
virtue and character to learn the skills and insight needed to achieve
This week the S&P 500 closed at 1,857 (above 1,844). At a minimum, stock
bears need to take out 1,844 before they can reach even modest corrective milestones.
Before the bulls can make any significant progress, they need to take out the
recent high of 1,878. Therefore, between 1,844 and 1,878, we prefer to remain
as patient as possible within the context of our rules-based asset allocation
system. The rules have been trying to "let the market come to us" as they did
not call for an across the board adjustment between March 18 and March 27.
Our asset allocation system has master allocation rules and rules tied to
each ETF held in the portfolio. On Friday, the rules called for an incremental
reduction on the growth side of the portfolio. We continue to maintain a respecting-the-market's-vulnerability level
of cash, along with stakes in U.S. stocks (SPY) and technology stocks (QQQ).
We will enter next week with a flexible and open mind.
Weekends - A Time To Improve
As we covered in detail on March
27, weekends are often the best time to plug holes or refine your approach
to the markets, which is a quadrant 2 activity. It is difficult to visit
Stephen Covey's quadrant
two when the financial markets are open. Reading can often spark creative
ideas. The articles below cover investment and risk-management topics that
apply to all economic environments:
Chris Ciovacco is the Chief Investment Officer for Ciovacco
Capital Management, LLC. More on the web at www.ciovaccocapital.com.
All material presented herein is believed to be reliable
but we cannot attest to its accuracy. Investment recommendations may change
and readers are urged to check with their investment counselors and tax advisors
before making any investment decisions. Opinions expressed in these reports
may change without prior notice. This memorandum is based on information available
to the public. No representation is made that it is accurate or complete. This
memorandum is not an offer to buy or sell or a solicitation of an offer to
buy or sell the securities mentioned. The investments discussed or recommended
in this report may be unsuitable for investors depending on their specific
investment objectives and financial position. Past performance is not necessarily
a guide to future performance. The price or value of the investments to which
this report relates, either directly or indirectly, may fall or rise against
the interest of investors. All prices and yields contained in this report are
subject to change without notice. This information is based on hypothetical
assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES,
EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM
ANY INFORMATION CONTAINED IN THIS ARTICLE.
Ciovacco Capital Management, LLC is an independent money
management firm based in Atlanta, Georgia. CCM helps individual investors and
businesses, large & small; achieve improved investment results via research
and globally diversified investment portfolios. Since we are a fee-based firm,
our only objective is to help you protect and grow your assets. Our long-term,
theme-oriented, buy-and-hold approach allows for portfolio rebalancing from
time to time to adjust to new opportunities or changing market conditions.