Market update - week ending 27th July, 2012

Big day for the market today, significant changes that are worth noting.

• SPY went long.
• TLT is facing resistance and stop is now change to 123.82
• DBA has been long for a while
• GLD's buy price is now slightly higher 159.2 but even GLD is close to turning long.
• UNG is long as well

So, the important theme is that SPY, TLT, DBA are all long and GLD is about to turn long. Implying, all asset classes are in the green. Message: Allocate your portfolio long and give appropriate asset allocation based on your view of which asset class is likely to outperform. This is fun time and CONTINUE to watch which ones are outperforming so that you can allocate more on the ones that do better than the others.

ETF	Status	Notes
TLT	Hold	Sell on a close below 123.8
DBA	Long	Stop Loss: Close below 29
SPY	Long	Stop loss on a close below 135.
UNG	Long	Stop loss on a close below 18.
GLD	In cash	Buy on a close above 159.2. Subsequently, stop loss on a close below 154.16.

Market update - week ending 07/15/2012

Since last week, there is no change to the plan; IOW, no change to the trigger points and stop loss points.
Markets continue to favor bonds at this point of time as compared to other asset classes in spite of Friday pop in stock prices across the board.

ETF	Status	Notes
TLT	Hold	Sell on a close below 122
DBA	Buy on a close above 29.6 or Hold	Stop Loss: Close below 29
SPY	In cash	Buy on a close above 138. Subsequently, stop loss on a close below 135.24.
GLD	In cash	Buy on a close above 158. Subsequently, stop loss on a close below 154.16.

Watch relative performance of asset classes

It is now time to watch how Gold, Stocks, Bond and Agricultural funds are performing. Gold has been lacklusture but stable for almost a year. Agriculture funds (PCRDX, DBA etc.) have underperformed for more than a year. Most of the world stocks have underperformed. US Bonds have done quite well over the same period of time. Finally, its election, and not uncommon for cyclic rotations and smart money to move from one type of investment to another during this period. The approach below provides a simplified view on entry points for investments in various asset classes. The approach is one of buy high and sell higher once the trend has been established.

What are inflection points for each stock/ETF?

• Buy SPY on a close above 138. Stop loss (on close) - 2% after trigger
• Hold TLT if price (on close) is above 122.
• Buy Gold on a close price above 158. Stop loss (on close): 2%.
• Buy DBA on a close price above 29.6. Stop loss (on close): 2%.

How could one reallocate their portfolio?
There are many different ways and ultimately, everyone has to decide on their risk taking appetite but here is one approach. Lets say, SPY and DBA trigger above their close prices, TLT stays above its stop price and Gold doesn't trigger. In that case, you would need to have positions in TLT, SPY and DBA and you could allocate them equally and as one scrip outperforms another, put a higher allocation towards the one that is outperforming.