-- Wall Street Money Letter Closing Trades--

The Stock Market:

The stock market, as measured by the Dow Jones Industrial average broke convincingly out of its early July trading range between 8,000 and 8,500 as shown in the following chart.  Our major support area of Dow 8,000 back then did not come close to being violated with two downside tests reaching well above this level.

We have continued to guide our clients, listeners and subscribers from levels below Dow 6500 to the markets current high tick at 9,300.00.  This guidance included  our minimum upside forecast to at least the Dow 8,500 area and once achieved, we have provided major market support levels that if violated would generate a sell action alert.  These recent support levels included 8,315, 8,450, 8,573 and today is currently at Dow 8,700.  This means that as long as the Dow remains above 8,700, which it currently is in the 9,200 area, the market trend is still up.   And will remain up provided the market does not cross below our levels of key support. 

The best way to participate in today's stock market is to either sell into any additional market strength or monitor positions with the Trailing Price Floor discipline we speak about on our radio program.  We are now entering the time period in this third quarter and perhaps a heightened risk seasonal period of time.  Last year, during this same time period, the financial markets were setting us up for its worst performance year ever.  Even Warren Buffett, who has the reputation of the "best investor in the world" was down 31.8% while the Dow was down 31.3% followed by the S&P 500 down 36.1% and the NASDAQ down over 40%. A good question to ask ourselves is can your equity portfolios or even better, our own risk tolerance and emotional level, go through that down market performance again?  

The Bond Market/Interest Rates:

Back in  the year 2000, we bravely forecasted that the yield on the 30 year U.S. Treasury bond, then at 6 1/2%, would fall to below a 3% yield which was achieved late last year.  Yields climbing back up to their current 4 1/2% levels now have not given us much of a low risk opportunity to trade Treasuries in our Nest Egg Managed Accounts.  As you already know, when interest rates move up, bond prices move down.   This interest rate move up of over 1 1/2 % has caused a lot of damage to most fixed income portfolios and fortunately, our managed accounts liquidated positions with a profit of over 1% within our last trade.  Although this 1% was not the customary capital gain we have been use to over the last sixteen years, we were grateful to have avoided a loss in this fast moving market. 

We believe the government's stimulus package and other volatile causing events have now been settled into the overall major trend in bonds and interest rates and where our cycles can once again anticipate future low risk investment opportunities.  Clients should keep in mind that our investment cycles have experienced many up and down moves in interest rates over the years and sometimes, watching and observing and in some periods, inactivity, is the most prudent strategy.

Inflation/Deflation:

One of the causes for an up tick in interest rates is based on the belief that the economy will come out of recession in the last quarter of this year.  Although we should have some positive effect on the economy with all this government administration's spending program, we do not believe it will be long lasting.  There have been times in the past where stimulus programs or our government has spent us out of recession including going to war.  These attempts which have taken place in the past, especially in the 1930's with similar cycles that we are looking at today, failed and rolled over back into a deeper recession. 

GOLD:

Gold Bullion is no longer an insurance or an inflation hedge as its price moves tend to run to the opposite direction of our U.S. Dollar currency.  The Exchange Traded Fund of Gold Bullion is priced at 1/10th of the gold ounce price and is used for trading in our Managed Gold Account.  In viewing the following chart, you can see a price trading range between gold at $700 and nearly $1,000.  Either the price of Gold will break above $1,000 or retest the previous lows of below $900 an ounce.  No one knows for sure but with the U.S. Dollar being very "oversold" at the moment, my belief is for another test of previous low price levels.

We have various managed accounts with specific objectives to meet your personalized investment needs.  In addition to our U.S. Treasury Nest Egg Managed Account, which is the only account you really need with an objective for double digit capital gain returns and an investment strategy using Treasury Securities that guarantee your investment against any loss. We also offer our Safe Harbor Managed Account with the objective of protecting the purchasing power of our US Dollar with investment categories including Natural Resources and Precious Metals.  I don't need to tell the astute investor that these areas were one of the best performing areas thus far this year.  Our  Exchange Traded Fund Managed Accounts gives us the opportunity to invest in many more sectors that our cycle research has identified for investment offering total diversification as well as the ability to invest inverse within various sectors.  If you cannot meet our minimum size requirement which is quite reasonable, smaller managed accounts such as our Gold Investment Account or our Tax Deferred Mutual Fund Account are also available in order to get your started with us right away.  All managed accounts are in your name where you have total control and on line access 24/7.   Come to one of our free monthly seminars or call our office for additional information.

The following table list the results of our previous listener newsletter promotion using our cycle analysis.  This was an effort in showing how well our cycle analysis works when managing investments in Exchange Traded Funds as well as sub accounts in the Variable Annuities we manage.