Pinnacle Advisory Group

A Bearish Divergence

Sean Dillon — Tue, 14 Feb 2012 19:02:10 +0000

On October 7, 2011, I wrote a blog post describing a bullish divergence forming in the Financial Sector SPDR. I used the Relative Strength Indicator to measure momentum and the price of the XLF to show that although the XLF made a new price low, the indicator did not confirm the drop. I could have used other indicators and equity [...]

Is the Volatility Tap Poised to Flow Again?

Rick Vollaro — Fri, 10 Feb 2012 19:51:11 +0000

We have been patiently waiting for markets to correct and give us a chance to purchase positions that edge our portfolios closer to a neutral stance. But so far this year, the volatility tap has been shut as we continue to watch a slow drift up in the markets. This has tested our patience as we wait for a catalyst [...]

Fixed Income 101 (or maybe 201)

Ken Solow — Thu, 09 Feb 2012 19:45:37 +0000

The duration of a bond portfolio tells you how much the price of your bonds will change for each percentage change in interest rates. A high duration means more sensitivity or price volatility as interest rates change. Duration tells you virtually everything you want to know about the price sensitivity of U.S. government bonds, which are presumed to be risk-free [...]

Da Bulls, Da Bears, and Da Uncertain

Rick Vollaro — Wed, 08 Feb 2012 13:19:40 +0000

Da Bulls The bulls believe that a global reflationary cycle is underway, and will likely drive the markets up towards the 2007 highs. The most bullish believe the U.S. economy will de-couple from Europe’s woes and will continue accelerating, Chinese growth will pick up on easier policy, and even Europe is past the worst of its mild recession. For investors [...]

How Bulls and Bears See Fed Policy

Ken Solow — Wed, 01 Feb 2012 18:40:34 +0000

Bearish investors look at the chart below and immediately notice that Fed intervention in the form of QE1 and QE2 (quantitative easing program 1 and 2, or perhaps more accurately, money printing programs 1 and 2) occurred after substantial market declines. QE1 is announced after the Lehman Brothers collapse in 2008 and QE2 is hinted at when Bernanke addressed the [...]

Going Hollywood

Rick Vollaro — Fri, 27 Jan 2012 19:25:44 +0000

Early this week I appeared on a panel discussing gold at the world’s largest exchange traded fund (ETF) conference, which took place in Hollywood, Florida. Given that the conference was being held in a picturesque setting on the beach, there were plenty of opportunities to be distracted by sun, surf, and sand. (Full Disclosure: My two favorites were the Lotta [...]

The Fed Throws More Fuel on the Fire

Carl Noble — Thu, 26 Jan 2012 14:11:31 +0000

Stocks are on quite a roll as 2012 gets underway. The S&P 500 is up more than 5% already — it’s on an annualized pace of 130% — which is its best start since 1997, according to Bloomberg. And stocks received a further lift yesterday afternoon following the latest Federal Reserve meeting. The Fed extended its pledge to keep short-term [...]

Is Natural Gas Oversold?

Sean Dillon — Mon, 23 Jan 2012 20:39:59 +0000

On Thursday, we initiated a position in the First Trust Natural Gas ETF for our Dynamic Moderate, Dynamic Appreciation, and Dynamic Ultra-Appreciation clients. The price of natural gas — used by millions of homeowners for heating — reached a new 10-year low last week at $2.32 per MMBTUs (1 million British Thermal Units), or 1 cubic foot. The price was [...]

Exploiting Logical Errors of Inference

Ken Solow — Wed, 18 Jan 2012 15:35:39 +0000

In my book, Buy and Hold is Dead (Again), I discuss in some detail Woody Brock’s views on the logical justification for active portfolio management. Brock lays out three ways active managers can outperform. First, they can better forecast structural changes in the economy. Second, they can better forecast how investors will react to changes in the news. And third, [...]

Balancing Fat Tails in Both Directions

Rick Vollaro — Thu, 12 Jan 2012 18:10:39 +0000

One of the things we’ve been defending against over the last few quarters is a rise in system risk. In particular the European banking system has been under fire, and for many months we’ve been watching sub surface risks rising in the credit markets. Bank lending is what moves world growth, so the idea that a banking crisis could lead [...]