The market struggled out of the gate yesterday and slumped during the first hour. Buying set in, and the bulls slowly but surely regained the upper hand as the major indexes pulled themselves out of the doldrums in part supported by good news on the jobs front (initial claims fell).

Some crosswinds were blowing from across the Atlantic as global and currency issues continued to weigh along with U.S. economic fundamentals. It did not help matters that Irish and Portuguese debt issues remained on the front burner.

Helping yesterday’s market recover was the dollar, which at first rallied and then fell supporting the rebound late in the day. Crude oil was up and gold was down with the big loser of the day being silver, which received a 7% haircut.

The major indexes continue to hover around their highs of the year, which always raises the question as to whether we’re near at a top and subsequent reversal. It could very well be, but so far any pullback has been met with buying keeping the downside risk limited.

This buying support will face some test today, as the futures point to a lower opening of about 0.5% based on disappointing results from Cisco. Cisco got taken out to the barn and spanked last night at a tune of -13.6%. Ouch!

The dollar proved to be almighty yesterday as its rally stopped just about all other asset classes from advancing.

Gold was up initially but reversed course; crude oil fell back and bonds dropped due to a rise in interest rates. And, as usual, the stock market slipped as the dollar headed higher.

Amazingly, the dollar’s rally happened despite a downgrade for U.S. debt by China’s Dagong Credit Rating Company. It reduced its credit rating to A+ from AA and cited a “deteriorating intent and ability to repay debt obligations” in view of the Fed’s recent stimulus plan. Ouch; you can’t get much more direct than that…

On the menu is the G-20 meeting on Thursday, which could affect the markets. Items to be discussed may be not only be the U.S. economy but also the debt issues of Ireland and Portugal.

While those meetings are usually nothing more but useless jawboning with no definite results or accomplishments, we may very well hear a little more name calling and/or mudslinging in view of the Fed’s questionable stimulus plan. Stay tuned.

It’s no surprise that, after last week’s rally, the markets were due for a pullback. Yesterday, things looked a little dicey for a while early on but, as we’ve seen so many times in the recent past, buyers stepped in and pushed the major indexes off their lows for the day. Except for the Nasdaq, we closed slightly below the unchanged line.

Gold again was the star of the day as it topped $1,400 an ounce for the first time. Clearly, this is a sign that all is not well economically speaking. It may also reflect the viewpoint that the Fed’s QE-2 adventure may not work, and/or result in more trade disputes and long term, will be inflationary in nature.

Additionally, concerns about Ireland and Portugal’s financial troubles contributed to a flight to safety, which nowadays would be the precious metals arena.

Silver was up even more than gold, while interest rates and crude oil rose slightly. With the sharp rally of the recent weeks, I expect the markets to continue bobbing and weaving until more upward momentum can be generated.

Chart courtesy of YahooFinance

For many years, TKF, one of the closed end funds (CEFs) investing in Turkey, has been hovering in the top M-Index rankings during bull markets.

As is the case with many CEFs, volume is simply too low for advisors to invest any meaningful client assets. TKF, for example, sports an average daily volume of only $750,000, which makes it suitable for only small investors.

For a couple of years now, a new Turkey ETF has been on the market with enough price and volume history on record so that I added it to the StatSheet a few weeks ago.

The ticker is TUR and, just like its closed end fund cousin, it has shown impressive performance during this current buy cycle. The average daily volume has grown to a strong $25 million, making it a snap to get in and out.

In my personal M-Index Ranking list, which features only ETFs with an average trading volume of over $10 million/day, it is ranked as number 1. That even beats the favorite Brazil ETF (BRF) by a few points.

Of course, a high ranking is always accompanied by high volatility, which is why I recommend a 10% trailing stop loss point, the same that applies to all country ETFs.

However, if you’d like to add a little firepower to your portfolio, this may be one ETF worthy of further research.

Disclosure: Positions in TUR

What a difference a few weeks can make. In “Chart Patterns” I examined a huge Head-and-Shoulders (H&S;) formation that the S&P; 500 had formed early in October. Here’s what I said:

…if prices rally from the top of the right shoulder and end up rising above the high point the “Head” has made (April 2010), all bets are off, and the bullish trend is likely to continue.

That is exactly what happened last week. Strong upward momentum took out the right shoulder and prices extended above the Head (red arrow). The updated chart now looks as follows:



[double click on chart to enlarge]

From a technical point of view, this means the bullish trend is back on. Its duration will be the great unknown. However, for those following chart patterns a new one will have to develop before any other conclusions can be reached.

As I said before, the Fed’s QE-2 efforts are a step into the unknown and into unchartered territory where certainly unintended consequences will appear when least expected. Just because we’ve taken out the old highs of 2010 does not mean all will be smooth sailing from here on forward.

On the contrary, while the focus of late has been on domestic issues like the elections, QE-2 and unemployment numbers, let’s not forget that we also have a struggling global economy with its own issues. Anytime, an unexpected external event can have an effect on the domestic market by derailing the current trend.

I am not being negative here, but merely realistic as I am observing that investors can easily throw caution to the wind. Let me be the voice of reason and tell you to always be cautious and to never ever abandon your exit strategy.

One of the oldest systems to generate buy and sell signals for equity indexes is the crossover of the S&P; 500’s 50-day and 200-day simple moving averages (M/As).

When the 50-day crosses the 200-day M/A from a level below, a buy signal is generated, which is also referred to as the Golden Cross. When it crosses from a level above, a sell signal is generated, which is also known as the Death Cross.

To demonstrate the effectiveness, I have marked the crossovers in the 7-year chart below. The buys are identified by a blue arrow, while the sells are marked with a red arrow:



[Double click chart to enlarge]

As you can see, using this approach, you would have participated in all of the “major” up moves of the past few years.

More importantly, you would have avoided the major downturns. It’s especially noteworthy that a sell was signaled late in 2007 with a new buy not being generated till the second quarter of 2009, causing an investor following this approach sitting on the sidelines throughout 2008.

While I don’t use this method in my advisor practice, I do observe its major turning points. What most investors will not like about this approach is that its buy signals are generated late within an up cycle. Case in point is the most recent Golden Cross, which just occurred during the middle of October.

However, if you are concerned with controlling downside risk, and are able to truly look at the big picture, without being distracted by quarter to quarter market idiosyncrasies, you should definitely be on the lookout for the Death Cross as your last line of defense.