Sleeping sickness

Hang on! The bottom did not drop out yet, not yet. Tell me if this drop will hold, I will pray to Thee my Lord for the miracle. If you are looking to go long for a swing, I  would suggest you to do that when we clear that small horizontal trendline in the middle of the chart. You can play the small bounces in between, so that you can buy icecreams for your kids, or pop sodas, chewing gums for yourself. Otherwise it is not worthwhile. You can go full stop short sell below the big bottom line with a 2% stop. I usually do not suggest shortselling (though I do it myself at my own risk many times) but this chart looks too enticing.

The real moves will happen during night because the above chart is Emini futures, hence I used the term "Sleeping Sickness". Well, this is not African Sleeping sickness but the American version of it.

Always keep in the mind the Dracula version of the markets, I posted what they may do.

Review of the European market indices

FTSE and DAX have been trading in a box for the last 2 months with the momentum moving up. All 3 major indices escaped the bearish cross down. It looks like that the down cross is inevitable this time around. I don't see anything bullish at this time. They are poised to go down. We will review after one week.

Weekly sector review

For the past week, financials were the leading sector while the Material sector is lagging all others.

In September, the basket stocks of Utilities was leading while the materials remains the loser.

For the Q3 2011, Utilities and the materials were the leading and lagging sectors respectively.

YTD and in the past 1 year , Financials were leading the stock market down while Utilities lead the sectors.

I suggest you look at the figure below to analyze which sectors lead the economic cycles and understand the current situation.

If it is not obvious to you, let me explain. The Utilities lead the sectors in the downtrending economic cycles - beginning or in the middle of recessions. You might be wondering what I am talking about while the GDP still shows growth. NBER lags by atleast 2 or 3 quarters, they come back and revise the calls as far as quarters upto 1 year. It is very well possible that, in future revisions, NBER may come and say we have been in recession since Quarter 2 of 2011. Or this quarter may be the beginning of the recession. 

Quarterly performance

Our fund review for the Q3 '11 ended shows a net gain of 16%. We hold no positions at this time. We swing trade or invest in buy and hold when conditions are favorable. When the market is volatile, we actively trade our positions. While market volatility is definitely a cause of concern for investing, our funds adopts a 2 pronged approach to different markets. Our total fund gains YTD have been 39%. We allocate our capital to 2 portfolios in order to maintain a balance between the 2 approaches. One portfolio (I) invests only when conditions are most favorable and another portfolio (II) trades aggressively. Asset allocation ratios in these portfolios change depending on the market trend. Portfolio I has a YTD gain of 13% while Portfolio II has a YTD gain of 46%. Most of my positions trade in ETFs. This helps us to maintain safe positions while still being in profits.

At this time, we hold no positions and remain in 100% cash. For an insight to our trading activity, you can subscribe at Stock fund blog.