Summary
The good news on the forecasting front: Last week, as a whole, came out just about as I had been opined. The bad news on the forecasting front: Last week did not configure at all like I had thought it would. Conclusion: The leg of the market's decline commencing in March is not over!
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* I thought there was a good chance that after a rough beginning to last week, the market would take a breather from its recent decline.
* Incorporated in this view was the thought the market would achieve some variety of short-term washout bottom last week, probably occurring on Monday or Tuesday. It didn't.
* Instead, early week firmness was followed by a sharp sell-off on Wednesday. Nevertheless, for the week as a whole, prices were up: DJIA +0.7%, S&P 500 +0.8%, NASDAQ 100 +0.9%.
* How important was last week's overall configuration? I think it will turn out to have been very important. In the absence of a clear-cut, short-term selling climax, all the market did, on balance, was to work off of some of its oversold condition.
The following table breaks out the tracking group's performance through yesterday from last week's lows, all set on Wednesday, 4/20. I've also included how the things looked versus the respective closes on election day.
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SELECTED STOCK-MARKET MEASURES
(Ranked Versus 11/02/04)
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04/26 Versus
04/26 Last 11/02 ------------
2005 Wk. Low 2004 L. Wk.
Close Close* Close Lows 11/02
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NYSE Comp. 7011 6938 6701 1.1% 4.6%
Wil. 5000 11348 11218 11075 1.2% 2.5%
S&P 500 1152 1138 1131 1.2% 1.9%
DJIA 10151 10012 10036 1.4% 1.1%
Value Line 370 368 366 0.5% 1.1%
Russ. 2000 588 585 585 0.5% 0.5%
NASDAQ 100 1420 1407 1495 0.9% -5.0%
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Average 1.0% 1.0%
Median 1.1% 1.1%
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*All occurred on 4/20.
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* Although there is a good deal of variance among the individual components, it is interesting to note that overall, yesterday's average close left the tracking group about as far above last week's lows as it was above the 11/2 election day close.
* In turn, the election day close created what I consider highly critical levels, since 11/2 was the inflection point of the so-called "Bush relief rally." If/when those levels are eclipsed on the downside, it will represent an important, highly negative technical development. At least that is how I read the tea leaves. Moreover, I strongly believe it is a matter of "when," not "if."
* On that score, I interpret last week's inability to achieve some variety of short-term selling climax as a decidedly negative portent for the period immediately ahead. Is it setting up a fulfillment of the old market axiom, "go away in May"? This year, it very well might be.
* As a consequence and as last week wore on, instead of covering up at least some of the model equity portfolio's S&P 500 short position by establishing some longs, I went in the other direction: I filled out the short instead.
* As previously reported, last Thursday (4/21), I increased my S&P short at 1,151.02, thereby taking the portfolio to the maximum 40% short position permitted under account guidelines.
* In hindsight, I jumped the gun a couple trading days, and by about 12 points, give or take. Nevertheless, the way the situation is shaping up, I simply feel more comfortable from a longer-term perspective in having the total allowable short position in place.
* What I'm looking for over the next few to several weeks is for the market to take out the 11/2 levels (an S&P of about 1,130), then as the year progresses, an assault on last August's lows. But I'll leave that discussion for another time.
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GRA MODEL EQUITY PORTFOLIO 2005 NON-MONEY MARKET
ACTIVITY (Account Inception Date = 12/31/04)
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Open Positions
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S&P 500 Equity Market Unit Short Sales
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Contract Gross Net
Date Quant. Price Proceeds Comm. Proceeds
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2005
03/04 SS 82 1220.38 $100,071 $125 $ 99,946
03/30 SS 43 1177.33 $ 50,625 $ 63 $ 50,562
04/01 SS 42 1189.36 $ 49,953 $ 62 $ 49,891
04/07 SS 43 1190.10 $ 51,174 $ 64 $ 51,110
04/12 SS 42 1190.07 $ 49,983 $ 62 $ 49,921
04/21 SS 87 1151.02 $100,139 $125 $100,014
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339 1184.20* $401,945 $501 $401,444
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Memo: S&P 500 close as of 4/26 = 1151.74 result-
ing in approximate unrealized gain as of that
date of $10,516 (including allowance for commis-
sions to close out position.)
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*Average (calculated on net proceeds).
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Closed Positions
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S&P 500 Equity Market Unit (Long Transactions)
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Contract Net Net Gain/
Date Quant. Price Cost Proceeds Loss
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2005
03/29 B 82 1164.48 $95,606 -- --
03/30 S 82 1178.44 $96,511 $905
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