Brief update...

I won't be much active during the holidays. So to most of you I wish you a Merry Christmas and a happy new year.

Let 2010 be full of happy and good things to all of you.

Anyways, I couldn't help myself to not leave here a brief picture on USD Dollar.

As I warned a few weeks back, the trend has changed. In terms of TA we've got all requisites of a trend change, a trend change that EW was long awaiting around the 74 level as I wrote here back in July.

For those that have a short memory: http://www.mybullmarket.org/2009/07/usd-update.html

;-)

 I don't think I got too wrong on it. Let's see how the rest of the prediction rolls out. Which is right here:

 I think a strong bear market rally has started for the US Dollar that will drive it up above their 2008 highs or it could be the beginning's of a new bull market. We'll track it along to see what may be in the cards.

Now, a curious fact is USD rocked up, EURUSD plunged everyone awaiting for S&P to plunge AAANND... nothing.

What I've said many times before in here that I was expecting was that Dollar, etc could go in their 1st wave down (EURUSD) or up (dollar index), while the stock indexes remained intact. My view was, these assets (currencies) could lead on the way down on their first waves and then rebound for their Wave 2  correction and stock indexes getting their tops during a lower high in currencies. It's pretty common since no asset has 100% correlation. The same happened in 2008 with oil, indexes and currencies. EURUSD topped when indexes were making their minor wave 2, while Oil topped when indexes were making their intermediate 2.

It would look something like this:

 I think I made my point. We'll see what the new year brings. But my opinion it will be what most don't want. I think 2010 will be much more like 2008 than any other year. But that's just me...

Today's post is a bit different and what I've been working on lately.

I've extensively been backtesting the LMT Portfolio premises. I have composed 100 random portfolios in which the stocks composing them all would fit within LMT parameters. The data totally beat the S&P. Both buy and hold for S&P, as well as passive investing with S&P (buy and hold + adding 10% of equity into the market every year).

Both got crushed from LMT. All 5 year rolling periods are positive for LMT unlike S&P.

Here are both charts worth taking a look in my opinion. One might say that the portfolio took advantage of the roaring 90's. True, but even so, starting a portfolio under the same characteristics at 2000 top, while S&P managed to pretty much be flat, LMT would manage 16% per year and that's taking into consideration the bear market.

This first chart does not add 10% of new cash into S&P Buy and Hold. But they don't differ much... the dash green line is what ~I consider an excellent long term goal.

This pretty much sums to a 20-to-1 harsh beating of LMTP versus the market. Should we take a large margin of safety, I would say a 5-to-1 would still be excellent.

Don't forget to check then, December 26th some of our stocks will be replaced by newer ones.

I'm gonna need my sleep now.

BTW, last night I experienced my first earthquake ... a 6.1 Richter scale quake. It sure was daunting...

Very late update...

I apologize for the very late update but I was a bit busy lately so I didn't have much time focusing on doing an appropriate update.

In regards to the indexes, not much has been going on... We've been in this boring range tight market for almost 2 months. What I said before still stands. We should be rolling over soon.

In fact, the dollar seems to have changed to the beginning of an uptrend. This reinforces the possibility of the indexes following suit soon.

EURUSD has definitely changed the trend... in fact wave 5 seems to be extending. Euro may find support in the 1.43xx area.

USD Index seems to have broken out of the downward channel it had been for almost 5 months. It also broke it's Long term trendline. Add this to the fact that the Elliott Wave Structure looks complete now, it has a very high degree of possiblity to begin quite a rally here.

First target will obviously be the 221 MA.

Although USD Index is very correlated to the indexes it doesn't mean they move in exact tandem. In EW terms for example USD Index could now be in the beginning of Wave 1 up, while the indexes (S&P and DOW) are in the midst of the final wave. This happened in 2008 in a lot of assets (ones being already in wave 1 down while others still upward). EURUSD for example should correct soon a bit, this could be a catalyst for new highs on the indexes (for their final wave) while Euro failing to make new highs (which i find very unlikely).

Gold and Silver seem to have started the downward move as well....

To me, this seems to be the long term picture...

EDIT

Also we're almost making changes in our LM Portfolio. Again, if you followed the portfolio, I hope you took my hint of starting the portfolio on November 1st due to seasonality. Long term, it shows that buy ins starting November have a statistical edge over other periods. It may not happen one year or another but long term it seems to be this way, so this was the reason on my own portfolio I did the same as I stated before the September 26th buy in.

This seasonality chart shows the reasoning behind it:

   As you can see, most the buy calendar periods fall in either trending up periods or after a big correction (August-October period).

I will go further in detail on this, once we make an update of LM Portfolio

Correction looming?

EURUSD has now what appear to be complete 5 waves. So a correction may be in the cards very soon.

A target for longs would have the 1.4850 as the minimum target.