Despite the recent rebound in the market place, not all is well in most 401k accounts, as MarketWatch reports in “Plenty of Reasons to Worry:”

Happy days are here again, right? After all, the markets are up, Americans are twittering happily about their 401(k) accounts, and life is good, right? Not so fast.

That’s bad, to be sure. But what’s even worse is that not enough Americans have retirement plans at work. According to Copeland’s analysis, just four in 10 families had a member participating in an employment-based retirement plan — either a traditional defined-benefit pension plan or a defined-contribution plan — from a current job. If my math is right, that means that six in 10 American workers don’t have an employer-sponsored retirement plan.

While that indeed does not sound too encouraging, it is up to each individual to ramp up their savings via a 401k and other means of setting money aside for retirement. No one else is responsible.

What concerns me more are the losses that many have experienced when the markets collapsed in 2008. Feedback from readers confirmed that many have sold their positions at steep losses and stayed out of the market because they were too afraid to jump back in to take advantage of the recent upswing.

By the time investors realize that they need to participate again, it will be too late. I hope I am wrong here, but I believe that current upside potential is very limited and grave downside risks remain setting up a potential repeat performance of last year.

This may not happen right away, but the economic outlook simply does not give me the warm fuzzies. If any future data shows that we’re not moving out of the recession, this rally will be over. I can only hope that investors have learned how to protect their portfolios when the long-term trends show that we are heading south again.

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

The rally resumed after a few flat days with the better than expected unemployment report driving the major indexes to their highs for the year.

Our Trend Tracking Index (TTI) for domestic funds/ETFs has now crossed its trend line (red) to the upside by +4.68% keeping the current buy signal intact. The effective date was June 3, 2009.



The international index has now broken above its long-term trend line by +15.03%. A Buy signal was triggered effective May 11, 2009. We are holding our positions subject to a trailing stop loss.



[Click on charts to enlarge]

For more details, and the latest market commentary, as well as the updated No load Fund/ETF StatSheet, please see the above link.

Reader Delo pointed to a link on Minyanville featuring Eight Lifestyles of the Rich and Incompetent.

There seems to be some correlation in the size of the mansion they are occupying and the stock price of the company they’re running. Enjoy the slide show.

If you watch psychologically important levels, then the fact that the S&P; 500 and Nasdaq remained above 1,000 and 2,000 respectively yesterday, is definitely a good thing.

Despite some bobbing and weaving throughout the session, last half-hour buying pushed the major indexes into plus territory, which means that the Dow and S&P; 500 have gained four trading sessions in a row.

I agree with the fact that the longer the indexes hover around these lofty levels, many money managers with large cash positions will be forced to put that money to work, which could keep the upward momentum going.

Four bits of good news kept the rally alive:

1. Caterpillar’s very bullish guidance

2. A better-than-expected report on pending home sales

3. A strong day for financials and commercial real estate stocks

4. United Airlines’ report of stronger-than-expected passenger traffic

Looming above the good news is Friday’s unemployment report, which has the power to move the market in either direction. Anything “less bad” than expected will very likely help the bullish cause.

It seems like no one bothered to look in the rear view mirror yesterday as the major indexes rallied on and broke two important psychological levels. The S&P; 500 managed to close above 1,000 for the first time since November 4th and the Nasdaq above 2,000, a level which it has not reached since October 1.

This now brings the S&P;’s gain for the year to just over 11%. You might be interested in knowing that the S&P; 500 is still 24% below the level of our Sell signal from 6/23/08. That means this bull needs more legs just to get to the breakeven point of last year.

Nevertheless, the current strength in the market is impressive, although I have some doubts as to its duration. Be that as it may, we try to participate in the current run with caution and always prepared to make changes to our invested positions should the need arise.

The current market rebound along with the questionable (and stimulus induced) economic recovery has some readers wondering to what extent they should participate in the current upswing.

Here’s what Paul had to say:

In spite of your skepticism regarding whether or not the market can hang on to recent gains, the trend for both US and International stocks has been very strong. Are you at liberty to say whether or not you are 100% invested yet? If not, what will it take to get you to a 100% equity position?

Personally, I am now 75% into equities, (US and International) but mentally I’m having difficulty investing my remaining 25% cash position, as this market has run up so far so fast.

That is very close to my general allocation. As I pointed out last Saturday, during this current buy cycle, mutual funds in general have been steadier and have resisted market pullbacks better than ETFs.

As a result, some of the 401k accounts I manage were able to reach a 100% invested position fairly quickly while others did not due to whip-saw signals. Predominantly, I have stayed in hedged positions but have added outright longs as well.

Should you now invest the balance and become 100% invested? Since no one can look into the future, I suggest you look at the risk you will be taking.

Say, your portfolio is worth $100k, of which you currently have invested $75k. If you add another $25k to your position, and the markets head south, your risk based on a 7% trailing stop loss would be about $1,750, which represents a loss of 1.75% of your total portfolio. If you’re moderate to aggressive, that is an acceptable risk to take, however, only you can make that decision.

If you’re the conservative type, you may be happy with your 75% allocation and leave it at that. Remember, your comfort level with market exposure is what matters most, not what others tell you should do.