SET Portfolio Update June 2009

| June 2, 2009

June 2, 2009

We got what we asked for.

I said awhile back, we need real economic improvement in order for the markets to continue move higher.  And right now economic data is not only ‘less bad’, it’s actually turning positive.  This is great news.

You see, the data was mixed in May.  It wasn’t enough to move the market either way.  Take a look at this chart of the S&P 500.  You’ll see it traded in a range of the high and low set early on in the month.


Now the data is giving the market just what the doctor ordered.  It’s moving higher once again.

Last week consumer confidence ticked up to its highest level since September.  If you remember, September’s when Lehman Brothers collapsed and the credit crunch really swung into high gear.

This isn’t just a blip on the radar either.  Consumer confidence has improved for three months in row.  In my opinion, it’s safe to say consumer confidence has bottomed.

A quick look back at history reveals something interesting.  Consumer confidence usually bottoms close to the end of a recession.  More importantly, the markets usuallyrally for months after bottoming.

In short, economic data is moving the markets and the move is higher.  We’ll continue to let our open positions run.

Position Updates

…. Energy Select Sector SPDR Fund (XLE) – Hold

Two key issues are moving oil prices higher.

First off, dollar weakness.  The US Dollar is falling in value compared to other currencies.  A weak dollar leads to higher prices for commodities and oil is one of them.

Second, a warning out of the IEA.  They said the current investment in new oil production isn’t high enough to meet future demand.  Basically, the current environment of over supply is going to be short lived.  We could swing right by balanced supply and demand. It’s more likely demand out paces supply.

Both of these factors have oil prices on the rise.  This is great news for the oil companies. We’re revising our price target, moving it higher.  The target is $63.

…. SPDR S&P Semiconductor ETF (XSD) – Hold

XSD is off to a great start.  Like I said in the trade alert, chipmakers’ stock prices should move higher as consumer confidence continues to improve.  And last week’s better than expected reading has our pick moving higher.  Hold tight.  We’ve got some room to run.

…. PowerShares Dynamic Building & Construction Portfolio (PKB) – Hold

PKB ran into resistance at the 200-day moving average on May 7th.  It wasn’t able to mount a charge as the economic data had the markets drifting sideways.

All that’s changing this month.  Fresh economic data (like consumer confidence) has the markets rallying and PKB has overtaken the 200-day MA.  It appears to be heading for our price target in short order.

…. iShares S&P N. American Tech – Multimedia Networking Index Fund (IGN) – Hold

No specific news on IGN.  It continues to approach our target price.  Hold tight, we’ll keep you posted.

…. SPDR S&P Biotech (XBI) – Hold

XBI finally broke above key points of resistance.  Unfortunately, it’s still not looking like XBI’s going to lead the markets anytime soon.  This ETF just hasn’t been able to get on track.  I’m moving this trade to “Hold” status.

…. Market Vectors Gold Miners (GDX) – Hold

We’re within striking distance of our target price of $45.50.  We’re sitting on a 31% gain in just a few months.  However, the price action of the last few trading days has me concerned.  Longer run I see GDX moving well past our price target.  However, this rally happened so quickly a short-term pullback isn’t out of the question.  I’m watching this one closely… I’ll keep you posted.

Action To Take

  • All positions are now on “Hold” status
  • SELECT SECTOR SPDR ENERGY FUND (XLE): Price Target moved to $63


Category: SET Portfolio Updates

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