Weekly Update 06-07-2010:

Our patience has paid off!  Since the top put in on 4/23/2010 to last Friday 6/04/2010 the S&P500 has dropped 12.5%.  During that same time frame our Core-Plus™ Medium Risk Growth portfolio has INCREASED 6.5%.  Though we had been lagging the market thus far YTD, we have in the last 6 weeks made a 19% gain on the market and now are about 1% ahead of the market YTD in our Medium Risk Growth portfolio.  Though it seems like it took forever for the market to finally “top out”, you can see that a Bear Market can easily “wipe out” 6 months worth of a Bull Market’s returns in just 6 weeks!

Last week we mentioned that the expectation would be for the market to retrace the 5/13 to 5/25 decline by an upward rally to the 1107 or higher, possibly the 1120 area before resuming another decline.  These two areas represent a 50% and 61% retracement of the above mentioned decline.  On Thursday last week the S&P500 barely approached the 1107 area with an intra-day high of 1105.6.  Then on Friday with a bad jobs report dropped about 3% to close at 1064.  Our target from here would be a likely small bounce early in the week to possibly the 1070 – 1080 area before making a retest of the 5/25 low of 1040 and likely creating a new low in the 1030’s.  We will see what the indicators are saying at that point; however, it is most likely that will be an intermediate term “bottom” for awhile.  If that is the case, we will be preparing to go LONG the market to take advantage of what should be a 50 to 60% retracement of the entire move down from the top made on 4/23.  This distance should satisfy our Risk/Reward calculation of at least a 5% or better move to the upside.  We will know more accurately what the target will be at that point but possibly it could retrace to the 1160 to 1180 ‘ish area of the S&P500 before turning for the next really big leg down.  If this scenario plays out the next leg down should be a “DOOZY” in that it should approach and most likely exceed the March 2009 lows putting the S&P500 in the 600’s and the Dow into the 6,000’s. 

So it looks like we are going to have a lot of great opportunities here moving forward with our Core-Plus™ portfolios taking advantage of both the UPS and the DOWNS of this market as we move forward from here.  We will remain in our SELL position and keep you posted when that changes.  Yours for Safe Sailing in Bull and Bear Markets.