Market update as of the market close Thur, 03 Feb 2011

Since my last update the stock market has advanced an additional 1.0% (SPX 1294-1307).

Following my call on 15 Jan for a decline the SPX fell to 1271 (a 1.78% decline). It then proceeded to stage a remarkable recovery back to the 1300 level (for a few days) before breaking above 1300. It closed yesterday @ 1307.

I have mentioned previously it has been my experience that when the market doesn't do what it's "supposed to do" then you have to respect the strength it exhibits by defying the odds. There has been plenty of bad news lately (inflation, bonds yields, oil prices, the Egypt situation, etc) that "normally" would have taken the steam out of this market but, to date; nothing has been able to trip up the current advance. There does not appear to be any indication Bernanke and the Federal Reserve are ready to take the foot off the gas pedal in an ongoing effort to boost this market.

You have to respect the technical’s and the tape.


Click on all charts to enlarge:


S and P 500 Index:


60 Minute:



Point and Figure 1-box:



6 Month Daily:



Point and Figure Traditional:



All short term, medium term and long charts remain bullish.

Overbought conditions have been reduced with the pullbacks in mid Jan and late Jan.

There is no technical indication this market advance is in any danger of reversing (yet?)



Provident Fund Charts:


Daily Ratio Chart (USD)



Weekly Ratio Chart (USD)



Weekly Ratio Chart (Euro)



Weekly Ratio Chart (British Pound)



Weekly Ratio Chart (Australian Dollar)



The Provident Fund ratio charts in both the short term (daily) and intermediate term (weekly) favor stocks over bonds over cash. This includes the same index priced in Euros, Pounds and Aussie dollars (weekly charts shown).


I had a subscriber ask about gold.

Gold (daily)



Gold entered a consolidation zone between 1325-1423 . The MACD has crossed below the zero line for the 1st time since August (short term bearish). As of today the short term indicators are bearish.

Gold spot support @ 1320 is critical. It tested last week but popped back up immediately. This is a good sign but needs to be watched closely.

Gold (weekly)



As shown, this current pullback is the strongest since the market advance in early 2010. The weekly technical indicators are bullish and there is a very nice trend line plus support @ 1325.

This would be a nice place to place a low risk entry with a stop below 1325. I did so through gold miner’s index in the ECAM asset allocation fund yesterday.

Gold (monthly)



Bullish. It would take a monthly close below 1278 to turn the long term chart bearish.

Gold Point and Figure:



The only worrying chart. Currently on a sell signal from 1360. Current advance would have to exceed 1400 to turn the chart bullish.



PreElection Years by Month

As I spoke about previous, the 3rd year of the 4 year Presidential Cycle is the "sweet spot" to be invested.

Using data that goes back to 1950, here are the numbers:


YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

1951 6.02 0.65 -1.47 4.42 -4.06 -2.60 6.87 3.93 -0.09 -1.38 -0.26 3.89

1955 1.81 0.35 -0.49 3.77 -0.13 8.23 6.07 -0.78 1.13 -3.05 7.49 -0.07

1959 0.43 -0.07 0.05 3.88 1.89 -0.36 3.49 -1.50 -4.56 1.13 1.32 2.76

1963 4.91 -2.89 3.55 4.85 1.43 -2.02 -0.35 4.87 -1.10 3.22 -1.05 2.44

1967 7.82 0.20 3.94 4.22 -5.24 1.75 4.53 -1.17 3.28 -3.53 0.75 2.63

1971 4.05 0.91 3.68 3.63 -4.16 -0.93 -3.16 3.61 -0.70 -4.18 -0.25 8.62

1975 12.28 5.99 2.17 4.73 4.41 4.43 -6.77 -2.11 -3.46 6.16 2.47 -1.15

1979 3.97 -3.65 5.52 0.17 -2.63 3.87 0.87 5.31 0.00 -6.86 4.26 1.68

1983 3.31 1.89 3.32 7.50 -1.24 3.52 -3.30 1.13 1.02 -1.52 1.74 -0.88

1987 13.18 3.69 2.64 -1.15 0.60 4.79 4.82 3.50 -2.42 -21.8 -8.53 7.29

1991 4.15 6.73 2.22 0.03 3.86 -4.79 4.49 1.96 -1.91 1.19 -4.39 11.16

1995 2.43 3.61 2.73 2.80 3.63 2.13 3.18 -0.03 4.01 -0.50 4.10 1.74

1999 4.10 -3.23 3.88 3.79 -2.50 5.46 -3.22 -0.63 -2.86 6.25 1.92 5.77

2003 -2.74 -1.70 0.84 8.10 5.09 1.13 1.62 1.79 -1.20 5.50 0.71 5.08

2007 1.41 -2.19 1.00 4.33 3.25 -1.78 -3.20 1.29 3.58 1.48 -4.40 -0.86



UP-DN 14-1 9- 6 13- 2 14- 1 8- 7 9- 6 9- 6 9- 6 5-9-1 7- 8 9- 6 11- 4

AVG%= 4.48 0.69 2.24 3.67 0.28 1.52 1.06 1.41 -0.35 -1.19 0.39 3.34

MED%= 4.05 0.35 2.64 3.88 0.60 1.75 1.62 1.29 -0.70 -0.50 0.75 2.63


PreElection Year Observations (year 3 of the Presidential Cycle): Since 1950,


1. The year is 15-0 for an average 18.27% return

2. March is 13-2 with no loss since 1955 for an average 2.24% return

3. April is 14-1 with no loss since 1987 for an average 3.67% return

4. The month of February is 9-6 for for an average 0.69% return



Bottom Line:


My comments from the previous blog are unchanged.

-All of my technical indicators have now switched back to bullish in all time frames (short term, intermediate term, long term, Provident Fund ratio charts).

-Combined with the bullish cycle period we are currently in (yearly cycle bullish, 4 year cycle bullish), we have entered the technical "sweet spot" for equity investing.


The market has shown unbelievable strength over the past month. It appears this is one of the few times it is best to "go with the flow" in spite of the continued over-bought, over-bullish and over-extended price action.

I will be watching price action on Friday and Monday next week. If they are both relatively stable I intend upon making a switch in the Provident Fund into a 75% equity position.

Any changes will be blogged when completed.


Emirates Provident Fund:

As of Thur, 23 Dec I remain in a strategic 25% equities/75% USD cash weighting as follows:**

-BlackRock US Dollar Cash Portfolio Fund: 75%
-Russell Global 90 Fund: 15%
-Fidelity International Fund: 10%

**Actual positions will change daily based upon price action and market volatility.


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dwaynemalone1@gmail.com