Last week I discussed the resiliency of the market and the increasing ability to hold up or even rally in the face of bad news.  That resiliency was on display again Friday morning as  the indices sold off ahead of the open on news the Senate failed to pass the auto bailout and more details surrounding the Bernard Madoff 50 billion dollar ponzi scheme, but began rallying almost immediately and closed with a decent gain.  Traders were probably pricing in to some degree that a short term resolution will come from the White House with a longer term plan implemented once the Obama administration takes control of the ship.  My feeling is that once some kind of plan is officially announced, we’ll get a decent move up but just as we’ve seen from other government intervention, the rally will be fairly short lived as reality sinks in. 

It’s been a tremendously tricky market to trade all year, particularly in the last few months.  This market moves fast so you have to be quick.  Ahead of the employment number last week, I was increasingly bullish, moving the Self Investors Model Portfolio to about a 40% net long bias.  However, it didn’t take long for the indices to touch major resistance around the 50 day moving averages and move into overbought territory.  While the character of this market has improved significantly, there is much more risk on the long side up here now so I’ve quickly moved the portfolio back into more of a neutral position as the market negotiates tough resistance levels. 

Here’s a look at the daily chart of the Nasdaq.  You can see a series of higher lows off that Nov low which is bullish, but we also face tough resistance around the 1575 – 1600 level where an intermediate downtrend and the 50 day moving average (in blue) converge.  Next week, the Nasdaq will get closer and closer to the tipping point of that wedge formation, so I believe a major move is coming.  In what direction is anyone’s guess at this point.  Wait for the market to reveal its direction.  If we break down below the wedge, we’re likely headed for a decent pull back off overbought levels (we haven’t been this overbought since the beginning of November).  If we break out big from the wedge and above the 50 day moving average (it has to be a big break with heavy volume), then we’re likely headed for a test of the next resistance level around 1800. 

 

::: Model Portfolio :::

** This section will now appear as a separate report about every other Wednesday. 

The Self Investors Model Portfolio wrapped up 2006 with a gain of 27.6%, 2007 with a gain of 30.2% and is nearly 35% ahead of the S&P in a very difficult 2008.  This is a REAL portfolio with position sizing and features annualized returns of 24%.

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::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Silver: 26.35%
2. Aluminum: 25.35%
3. Copper: 24.95%
5. Nonmetallic Mineral Mining: 24.60%
6. Gold: 22.10%
7. Steel & Iron:  21.70%
8. Industrial Metals & Minerals: 20.55%
9. Oil & Gas Drilling & Exploration: 17.90%
10. Metal Fabrication: 16.45%

– Top 10 Worst Performing Industries For the Week –

1. Apparel Clothing: -11.55%
2. Property Management/Development: -9.70%
3. Processing Systems & Products: -9.20%
4. Banks – SE: -9.15%
5. Banks – NE: -8.70%
6. Banks – Midwest: -8.50%
7. Banks – SW: -8.10%
8. Air Delivery & Freight Service: -8.05%
9. Banks – Pacific: -7.90%
10. Recreational Goods: -7.80%

– Top 5 Best Performing ETFs For the Week –

1. Asa Gold (ASA) 24.46% 
2. Market Vectors Gold Miners (GDX) 23.40%
3. Market Vectors Steel (SLX) 23.35% 
4. SPDR Metals & Mining (XME) 22.35%
5. Market Vectors Coal (KOL) 20.65%

– Worst 5 Performing ETF’s –

1. HLDRS Regional Bank (RKH) -9.00%
2. SPDR Regional Banking (KRE) -5.70%
3. iShares Transportation (IYT) -5.50%
4. PowerShares Dynamic Banking (PJB) -5.40%
5. SPDR Financials (XLF) -5.30%

::: Upcoming Economic Reports (12/15/2008- 12/19/2008) :::

Monday:        Capacity Utilization, Industrial Production 
Tuesday:       Fed Rate Decision, CPI, Building Permits, Housing Starts
Wednesday:  Crude Inventories
Thursday:      Initial Claims, Leading Indicators, Philly Fed
Friday:           None

::: Earnings I’m Watching This Week :::

Monday:  Titan Machinery (TITN),

Tuesday: Adobe Systems (ADBE), Best Buy (BBY), Factet Research (FDS), Goldman Sachs (GS)

Wednesday: Morgan Stanley (MS)

Thursday: Accenture (ACN), China Medical Technologies (CMED), Fed EX (FDX), Lennar Corp (LEN), Oracle (ORCL), Research In Motion (RIMM)