It’s been some time since I’ve put together the weekly report.  Between the power outages, the holiday festivities and a big upgrade here at Self Investors of all software and a move to a new server, I’ve had little time to post here at the blog.  That will continue through the middle of January as I’m taking off for a week of vacation in Mexico to recharge the batteries for 2009.  I’m excited about the coming year and hope you’ll continue to join me as I navigate the wild waters that is the stock market. 

The market has certainly improved over the past several weeks and I’ve been highlighting the ability of the market to shrug aside bad news and hold steady or even rally for decent gains. In recent days the indices have begun to battle that pesky resistance of the 50 day moving average and last Friday managed to really bust through in a big way, albeit on light holiday volume.  On Dec 30th I sent members a report on the current market discussing the renewed vigor of the indices as they tested the 50 dma again.

“Is the 2nd time a charm?  For the 2nd time this month, the indices are attacking major resistance of their 50 day moving averages.  With the first test a couple weeks ago, I cautioned against getting too aggressive because of overbought conditions.  The market had just come too far too fast off the Nov lows and needed to rest and work off overbought conditions.  With a bit of holiday rest, and overbought conditions no longer an issue, it appears the bulls may have their legs back with a nice follow through today on yesterday’s late day recovery. 

Yes, it’s holiday trading with very light volume, but with the market able to digest gains in a very healthy manner and now poised to break through the 50 day moving average once again, I am increasingly bullish on this market.  I began adding some additional long exposure to the Self Investors Model Portfolio over the past few trading days and prepared to add more if we can spike above the 50 day moving average and hold. 

The indices are right on the 50 day moving averages .. the Dow and S&P are actually a hair above.  This sets up an interesting trading day tomorrow as we head into the New Year’s holiday on Thursday.  A follow  through on today’s action and a hold above the 50 day moving averages would be very bullish for this market as we head into 2009.  A scenario I could see playing out is a January rally up to major resistance levels on hope that a new administration will bring positive changes, followed by a sell the news at the end of January or early February once reality settles back in.  With that kind of scenario, a 10 – 15% rally from current levels is most likely with an outside chance of testing resistance of the 200 day moving averages (which would represent a move of 25 – 30%). 

While I am increasingly bullish and have added additional long exposure, I’m still only about 30% net long in the portfolio.  I probably won’t increase my long exposure too much until traders return from vacation next week.  How this market reacts in the first few days of next week will be very important.  If the bullish action of late yesterday and today remains, I may increase my long exposure to 60 – 70%.”

I still believe there is a very good chance of an Obama hope rally of 10 – 20% from current levels, but once reality sinks in we’re likely headed for some rough trading as we get into the spring.  Let’s have a look at the indices to get an idea of support/resistance and where we may be headed in the coming weeks.  Taking a look at the S&P500 below you see the first major significant push (notice I say push and not explosion!.. it happened during light volume holiday trading)  above the 50 day moving average  there in blue.  As I mentioned at the end of December in my email to members, how traders respond upon returning from vacation will be critical.  I want to see the market digest last weeks run in an orderly manner and test what could be a new level of support at that 50 day moving average.  If we can do that and get some good institution buying, we could very well rally up to the Nov high around S&P 1000 and possibly test the next level of resistance around 1050 (levels of resistance highlighted with purple lines). 

While I remain more bullish on this market, lets see how we trade in the first few days of full volume trading.  Any lighter volume pull backs will offer opportunities to add additional high quality long positions.

You all have a good couple weeks trading! I’ll be returning to a more normal posting schedule here towards the end of January. 

::: 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 finished 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. Toy & Hobby Stores: 29.10%
2. Aluminum: 22.10%
3. Nonmetallic Mineral Mining: 20.30%
5. Industrial Metals & Minerals: 18.90%
6. Trucks & Other Vehicles: 18.50%
7. Copper:  18.45%
8. Marketing Services: 17.25%
9. Oil & Gas Equipment & Services: 16.85%
10. Printed Circuit Boards: 16.35%

– Top 10 Worst Performing Industries For the Week –

1. REIT – Retail: -2.75%
2. Long Distance Carriers: -1.65%
3. Mortgage Investment: -1.50%
4. REIT – Residential: -.55%
5. Water Utilities: .30%
6. REIT – Healthcare Facilities: .45%
7. Tobacco Products: .55%
8. REIT – Diversified/Industrial: .75%
9. Computer Based Systems: .95%
10. Drugs – Generic: 2.50%

– Top 5 Best Performing ETFs For the Week –
(excluding leveraged ETFs)

1. Templeton Russia & E Europe (TRF) 31.65%
2. US Oil (USO) 22.80%
3. Claymore Global Solar Energy (TAN) 20.25%
4. Germany New Fund (GF) 19.50%
5. iShares US Oil Equip & Services (IEZ) 19.15%

– Worst 5 Performing ETF’s –

1. iShares Lehman 20+ Bonds (TLT) -3.75%
2. iShares Lehman 7-10 YR Bonds (IEF) -2.00%
3. Market Vectors Russia (RSX) -1.25%
4. iShares Lehman 1-3 Yr Bonds (SHY) -.55%
5. iShares Lehman Aggregate Bonds (AGG) -.45%

::: Upcoming Economic Reports (1/5/2009- 1/9/2009) :::

Monday:        Construction Spending, Auto/Truck Sales
Tuesday:       Factory Orders, ISM Services
Wednesday:  Crude Inventories
Thursday:      Initial Claims, Consumer Credit
Friday:           Nonfarm Payrolls, Wholesale Inventories

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

Monday:  Mosaic Company (MOS)

Tuesday: Team Inc (TISI)

Wednesday: Monsanto (MON) 

Thursday: Apollo Group (APOL), Chevron (CVX)

Friday: KB Homes (KBH), AZZ Inc (AZZ)