Weekly Commentary for January 18, 2011

This is the point where things *could* get dicey. So it’s really important you understand what may unfold in the near-term.

Some areas of the stock market — and some of the stocks, ETF’s and mutual funds I bought for you a few weeks or months ago — are getting extended. Nothing wrong, just extended. And what normally happens is, we go through a period where we see a pull back.

***** ***** *****

Pull-Back: When the value of your stuff goes down.

And sometimes, when your stuff is going down, it can go down pretty fast. Like – in a few days, poof! Do not let this scare you, or stress you out. So, what’s a normal pull back, you ask? Five or six percent. Could even be ten percent.

Let’s put this in perspective, ok? A 5% drop in your $10,000 mutual fund puts it at $9500. A 5% drop in your $200,000 IRA puts it back to $190,000. A 5% drop in the Dow (about 600 points) puts it at 11000

Normal pullbacks are simply that: normal.

If you are relying on a blog post for specific investment advice, you are making a huge mistake. Please speak with an investment adviser before making ANY investment decisions. If you do not have an investment adviser, we encourage you to contact Mullooly Asset Management at 732-223-9000, or through our website.
Under no circumstances should the content discussed on this post be considered specific investment advice.

***** ***** *****

Look, there are a lot of charts I like right now, but they are just getting extended. They need a breather. It’s foolish to chase these extended charts (we say “up on stems”) because eventually those charts don’t stay extended forever.

See, either these charts pull back a bit and then resume their upward climb (what we are seeking), or they zoom upward and then just fall apart, like the New York Mets (it seems) every June. Like a supernova, a mirage.

What’s pulling back *right now* that still looks OK longer term? Gold and all precious metals, China. What *just* pulled back and now appears to be moving again? Real estate. The pull back was so subtle some of you hardly even noticed this sector did nothing for a while.

What is due to pull back very soon? International markets. Technology (including internet)

What is *still* out of favor, no matter what day it is? Bonds

Some of the big “hot buttons” for me in the market: What’s happening with oil? What is happening with the dollar?

When the dollar goes up, international markets and precious metals get a whacking. The dollar can set off these pull backs all by itself.