The mid June low came off with market-based sentiment quite bearishly configured. 2CS was 108 at the low with about 110 being typical for milder correction lows in bull moves. So 2CS was compatible with a low. However, volume per point of daily change for the individual 30 Dow Jones stocks was lagging the Dow Jones 30 on-balance line. This is something I learned from Don Wolanchuk gradually since 1999. Actually I read about part of it decades ago in one of Joseph Granville's books on on-balance volume when Don Wolanchuk was his technical analyst.
There is no book or website on this method, so it took me a while to grasp the concept. As is often the case, it's a rather simple idea. In trending markets, it tends to be true that it takes more volume to move each Dow stock one point or dollar as the trend matures, so that the number of stocks with declining volume per point outnumbers those with rising volume per point. To my way of thinking this is a reflection of trend-changers starting to reverse course. Total exchange volume may or may not rise into a top or into a bottom, but volume per dollar change per stock starts to lag. Anticipating a possible low, I had been buying FAIRX on down days as well as ASA and GGGG. It's no secret that gold stocks have not kept up with gold for a few years, but actually the stocks haven't kept up for 15 years and are therefore extremely undervalued. http://screencast.com/t/wem5Z3W1BS8t
FAIRX is recently concentrated in the most hated bank and insurance and real property stocks, so my thought was that it could surprise on the upside on a market reversal. It's still early but FAIRX has done well since the retest low of Dow and SPX about ten days ago. I didn't do much else except to sell about 20% of my Anworth Mortgage REIT stock ANH on strength and ahead of going ex-dividend. I did add to the new world high dividend stock SDIV to get more high yield diversification.
On a gains year-to-date divided by December 31, 2010 net asset value, I am up a modest 4.02%. This includes all investment assets in all accounts: cash, stocks, bonds, and gold/silver. With the US$ down 5.9% year to June 30, I am down nearly 2% on a real return basis. I'm not proud of this record, but it shows that making money in a conservative retirement fund isn't easy with rates so low. Instead of 5-6% on cash or near cash, which used to be the norm, we're lucky to get 1-2% now! I did also lose some on the silver reversal. Taking risk, as in silver and even in FAIRX, is the other side of the low interest rate trap for retirees. We have to take some risk but try to keep it in bounds. Wellesley Income VWINX/VWIAX is up 5.5% ytd and Vanguard High Yield VWEHX/VWEAX and Permanent Portfolio PRPFX are up a bit less, all on a total return basis.
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