11/23/2011

Happy Thanksgiving! I hope you all have a wonderful holiday. Karen and I will be hosting Thanksgiving dinner at our house this year. There will be 14 of us and three dogs (two Springer Spaniels and one Yellow Lab). Karen, myself, and the kids will also be running in the York, PA YMCA Turkey Trot again. Always a fun run and it is so cool to run into so many friends that we rarely see, except for at this annual 5K run. After enjoying dinner, we will once AGAIN, retire to our TV room and watch Christmas Vacation, followed by Elf. Classic movies, that we watch every Thanksgiving. They never get old. Thanksgiving always gives me pause to reflect on a number of things in life. Christmas is fun, but so tiring and busy. It is during Thanksgiving where I like to be grateful for my health, family, friends, food, clothing, and shelter. I am also thankful and reminded of the tremendous sacrafice that our military and their families are making for us. God Bless them! Some are included in this update. Having said that, we would love to hear what you all are doing for Thanksgiving. Anyone running a Turkey Trot? Hosting a big dinner? Traveling? Vacationing? Shoot us an email, we’d love to hear from you.

Two quick pattern updates:

S&P 500 and the U.S. Dollar (We are evaluating a potential investment in a leveraged US Dollar Fund. We think it becomes very attractive if the Dollar closes in the $79 range…more to follow and we may just opt to stand fast with current investment allocations)

Below is the weekly chart of the S&P 500. Draw your attention to the blue trendlines and note the similarity in pattern between today and 2008. Again, we have to respect this current pattern as being bad for equities. We are certainly open to any scenario, but right now we continue giving the bears the benefit of the doubt. We remain conservatively invested favoring bonds and conservative growth funds over moderate and aggressive growth.

Next we look at the US Dollar. For a moment, ignore the red lines. We talked about the blue resistance line last week. As of today, we find the Dollar now at it’s fifth test of this resistance. There is a lot of “white space” or room to explode higher up towards $88 it the Dollar pushes past $79. I find very little resistance between $80 and $88. Now let’s look at the red lines. These represent retracement levels between the highs and lows of the Dollar. These retracement levels can serve as estimates for resistance and support and we need to be aware of them. Bottom line, I see some potential consolidation and trading range activity in the $80 to $82 range. Perhaps a speed bump in a strong move higher. KEY TAKEAWAY from the exercise below, the Dollar is presenting a very ominous scenario for equity and commodity investors. IF this script unfolds, our current conservative posture should serve us well.

So while we are conservative and very cautious, we are open to all kinds of scenarios. We just have to objectively look at what the market is telling us. I think it is hard to argue against a bearish case right now. I could even show a pattern that presents a scenario (UNLIKELY) that could possibly push the S&P 500 into the 1300 range. We also have a monthly momentum model that evaluates seven major asset classes. Since July it has favored Treasuries (as Growth Investors know, we have very robust gains in a leveraged Treasury Fund since this buy signal). It continues to favor Treasuries, but again, at the end of November, if it favors another asset class (AGAIN UNLIKELY), we will listen to it and allocate capital accordingly.

If you have any questions or concerns, please don’t hesitate to call or email me. I’d be glad to connect.

Sincerely yours,

Matt Falvey

Chief Investment Officer

Rich Investments, Inc.

October 24, 2011

With the S&P 500 up over 6% for the month ending 10/21/2011, I wanted to take a quick look at the charts and focus in on a longer term perspective.

Bottom line upfront, we continue to give the bears the benefit of the doubt and view the recent stock market strength as a bear market rally. The probability that we are in a bear market is high. The key word is probability. Certainly, I can’t guarantee this and it is possible that we could return to a rising equity market, or bull market. We believe this scenario is unlikely however. So the question one might ask us is, “At what point would you change your opinion?” So here is what would cause us to change our tune:

1. Our monthly momemtum model favors equities, Commodities, and possibly REITs over Treasuries.
2. The S&P 500 blows thru 1275 on strong volume and then retakes it’s 12 month simple moving average.

Until one or both of these scenarios take place, we will continue to be conservatively invested.

Below are two charts. I know some of you get intimidated or confused with charts, but if you take your time and just look at the patterns that we are seeing and monitoring, you will understand why we are not impressed with the current market strength….even though the bulls have clearly seized the upper hand in the short term (from both a technical picture and price momemtum).

In this chart of the S&P 500, draw your attention to the negative slope of the 200 day moving average, as well as the 1275 price level. The negative slope of the blue line (200d moving average) does not portend a healthy market. The 1275 price level is close to the 200d moving average and it also where I place a strong technical resistance line.

The second chart that I would like to share with you shows the pattern similarities to what the S&P 500 looked like back in 2007/2008. Of particular note, look at the left blue circle and see how the market rallies about 14% before very quickly retracing all of it’s gains and then turning control back over to the bears. This pattern bothers us and warrants caution.

If you have any questions, please don’t hesitate to call or email me.

Respectfully,

Matt Falvey, Chief Investment Officer, Rich Investments, Inc.

In spite of the nice stock market rally the past week, nothing has changed the overall technical picture of the S&P 500. We believe that we remain in the initial stages of a bear market. While pundits and fundamental analysts talk about the “typical” 4th quarter rally and seasonably favorable time for the market cycle, we prefer to guide our investment decisions based on objective technical and price trend analysis…this allows us to invest based on probabilities. We are not seeking perfection and remain open to the reality that a robust break out above 1225 and then 1260 could cause us to change our tune and re-look things. While a break above 1225 is within the realm of reason and would certainly be a nice move for the bulls, we believe that the probabilities of pushing past 1260 are very slim. Currently, our managed accounts are overweight fixed income and hybrid mutual funds and we are giving the bears the benefit of the doubt. W e think this allows us to respect bear-market rallies, yet weather a significant storm to the downside. Obviously, there are no guarantees and only time will tell. Patience and discipline will be our umbrella and rain gear.

Yesterday I “tweeted” about the S&P 500 approaching and moving into “the red zone.” Below is the chart that I posted.

Below is a chart of the VIX as of the close from yesterday. The VIX is within range of channel support. In my opinion, if it bounces off support, it could mean trouble for equities.

Lastly, in the chart below, check out the huge red “storm cloud” that the S&P 500 has just moved into. In technical analysis, this is known as an Inchimoku Cloud. It’s size and the resistance zone that it is hovering over portend a very ominous picture for equity investors. Again, this is not guaranteeing a 100% bear market condition. Conditions could change and the storm clouds could clear out. However, from a probability standpoint, when combined with other indicators, this pattern warrants caution.

Best returns,

Matt Falvey

October 10, 2011

It is still not to late to give us a call to see if we can help.  1-800-290-7424

Does the market feel like 2008 all over again? Could we see a bear market rally to S&P 500 40 Week EMA before a potential reversal? It is certainly within the realm of reason. Some tough resistance to get thru first.

Respectfully,

Matt Falvey, Chief Investment Officer, Rich Investments, Inc.