September 21, 2010

Dear Valued Friend and Client:

We are rapidly approaching the end of September, as well as, the end of summer.  Have you noticed that our mornings and evenings are not as hot -- even though mid-day remains quite hot?  I find that I do not respond to my normal summer activities as I had in the past.  How about you?  I certainly don’t want to blame it on “getting older,” so it must be caused by the recovery from my recent back injury; don’t you think?

By the way, I want to thank you all for the many thoughts and wishes for a speedy recovery, which fortunately has occurred.  I only experience minor discomfort these days and hope soon to report a complete recovery.

I am thankful I have always had a very strong stomach when it came to riding rollercoaster-type rides at theme parks.  I, again, feel as though I am riding another wild theme park attraction as I follow the action of the stock markets around the world.  During the past few weeks, stocks have rallied back to a slightly positive position; which is actually surprising since September is generally considered a poor month for stocks.

I thought you would find the comments from one of our technical advisors, STIR Research, interesting in the paragraphs below:

 The month of September has rightly earned the reputation or distinction of being the worst performing month of the year since 1950. But this year it is different. As of yesterday’s close, the DJIA, S&P 500 and the Russell 2000 are having their best Septembers in 60 years! Who would have believed that possible?

The month is not over and a lot can happen over the next seven trading days. Historically, (take this with a grain of salt) when the S&P opens strong in 11 of the past 14 years, it tends to close weak due to end-of-quarter mutual fund portfolio restructuring. This may also turn out to be different this year.
 
The current quarter is on pace to being the best so far this year. Fund portfolio managers who have been sitting on the sidelines with too much cash or bonds, will try and beef up their quarter end statements by becoming fully invested. Who wants to explain why they just missed the best quarter of the year. The pressure is on: new money does not flow to those who are underperforming and existing money can exit.

Why the big September rally? We could list a lot of culprits, but one has to wonder with Septembers bad reputation did investors and fund managers move out in August anticipating a bad September? Therefore the selling was done and over in August, which was pretty dismal.

At some point the market will take a breather and consolidate its recent gains. And that may be what happens for the balance of the month.
  

Generally, the majority of advisors we follow are still very cautious and think we are in a “trading range;” and, if they are correct, stocks could well come right back down to where they were three weeks ago or even go much lower.  As a result, we remain very cautious and will not make any move back into a larger percentage of stocks until we see a much stronger likelihood of a continued uptrend.

As always, I am here to discuss situations that concern you or even to just say hello.  Do not hesitate to call me or make an appointment if you would like to come to the office for a meeting.  In the mean time, have a wonderful week!