Wall Street stabilizes after disastrous week – RSI picks RWM; Stops hit on PCY & SIVR September 23, 2011
Posted by Marlowe Cassetti in RWM.trackback
The Dow Jones industrial average on Friday suffered its worst week since the depths of the financial crisis in 2008, stung by severe anxiety over Europe’s spiraling debt crisis and a warning from the Federal Reserved about the U.S. economy.
But stocks ended higher after a disastrous four days of selling, which helped push down the S&P 500 index 6.6 percent for the week.
Volatility spiked in a revival of the tumult seen in August. Fears of a Greek default and the Federal Reserve’s gloomy prognosis for the U.S. economy spurred heavy selling in equities.
Stocks seesawed between gains and losses on Friday, but the S&P was able to hold above the August 8 low of 1,119, a key support level that served as a trigger for buyers during the week.
The Dow Jones industrial average gained 37.19 points, or 0.35 percent, to 10,771.02. The Standard & Poor’s 500 Index gained 6.83 points, or 0.60 percent, to 1,136.39. The Nasdaq Composite Index gained 27.56 points, or 1.12 percent, to 2,483.23. (commentary & photo courtesy of Reuters)
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It was a tough day for RSI as the portfolio shed PCY and SIVR when they hit their stops. Selling these two funds raised cash reserves to 60%. The remainder of the portfolio is invested:
- PowerShares Fundamental High Yield Corp Bond (PHB)
- ProShares UltraShort S&P500 (SDS)
- iPath S&P 500 VIX Mid-Term Futures ETN (VXZ)
- PIMCO 25+ Yr Zero Coupon U.S. Treasury Index ETF (ZROZ)
As you can see, this portfolio is not poised for a bull market. So today’s pick will add to that bias:
- Buy 139 shares ProShares Short Russell2000 (RWM); Volatility = 8.1%
Okay, let’s look at the chart. This fund is very volatile as illustrated by the chart. The Russell 2000 is an index of small capitalization stocks. If we fall into another recession this fund, that shorts the R2k will rise. In the past five days RWM has taken off, so you might want to wait and buy this on a dip (if it ever materializes). Bottom line this a bet on another recession.
Have a great weekend.
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