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.
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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.
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Under no circumstances should the content discussed on this post be considered specific investment advice.
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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.