Late slide in financial stocks hits stock market – Which way to lean? May 24, 2010
Posted by Marlowe Cassetti in DOG, FHO, MHY.trackback
Financial companies dragged stocks lower Monday as already anxious investors grew even more uncertain about the U.S. government’s financial overhaul plan and debt problems in Europe.
The Dow Jones industrial average slid 80 points in the final 15 minutes of trading to end with a loss of almost 127. It was the lowest close for the Dow since Feb. 10. The Dow and the Standard & Poor’s 500 index fell more than 1 percent.
Investors are worried about limits that could be placed on U.S. banks in a final version of the financial overhaul bill. A bill that passed the Senate last week is now being reconciled with the House version. The late drop illustrates how jittery traders are in particular about what will happen in Europe. (market commentary & photo courtesy of AP)
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The RSI portfolio made a nice gain today led by MHY, FHO and DOG. The portfolio has a defensive bias, not by my design but by the RSI system. We have recently seen protective stops exiting our long positions in equity ETFs and material/commodity funds. Thus we have built up money market reserves. So the strategy is to wait for RSI to issue some new buy and deploy the cash reserves. No need to forecast what the future holds.
With that noble stance, let me observe that there are a lot of concerns out there that make me happy with a defensive portfolio. Troubling thing is that this market has been in a broad rally, based in part on the expectation that we are moving out of the depths of an economic depression. Excuse me .. I mean recession. Maybe, just maybe, we may have a W recovery rather than the expected V shaped recovery. In simple terms, maybe another move down before we get out of this mess.
The above graphic is from the Conference Board. Likewise, the respected economic cycle forecasting group, ECRI issued a report on May 21st stating U.S. Indexes Point to Change in Cyclical Direction. This is a sobering thought indeed. In the vernacular of tennis, not wanting to be “wrong footed”, I will be awaiting RSI’s next pick to see which way to lean.
Speaking of the devil, there were no new RSI picks tonight. Catch you later.
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