The Average Investor's Blog

A software developer view on the markets

The Weekly Update

Posted by The Average Investor on Jun 11, 2011

Stay out – that’s what all the 20-week EMA has been telling us over the last two weeks. Last week the US stock indexes caved in and at the end of this week the Emerging Markets and the US REIT gave a sell signal too.

The EEM position was short lived, yet another whipsaw, and resulted in a loss of -2.68%. The VNQ position on the other hand has been open for a while, since July 23, 2010, and have resulted in a 16.34% gain.

Markets seem to be getting in a grizzly mood as of late and it seems to be very hard to think of any positive event on the horizon. In my view we have been on a drinking binge since the beginning of 2009 orchestrated by the central banks. Now even the hardest participants are starting to give up and there is nothing, literally nothing left but a heavy, dark hangover.

Seriously though, what is there to show for all the money we destroyed by pouring them hopefully into the system? The housing in the US is officially in double dip, Greece is back in the same situation as a year ago. Shall we take pride in reducing the unemployment by a mere 1.4%? While that’s a significant number, was it worth the money? Japan, the third largest economy, is in a recession yet again largely as a result of the devastating quake, but also aided by the sick, debt-laden economy they have been running for a while now.

It does look ugly, not only from a technical perspective. The only bright spot in my mind is that despite of the six red weeks, the pullback has been relatively mild so far, less than 8% on the S&P 500. For comparison, in May 2010 the S&P 500 lost almost 16% in the matter of a few weeks. Let’s hope it turns out to be just that – a minor correction.

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