Klein Market Summary-October 8th, 2012

Klein Market Summary

October 8th, 2012

Current Market Facts:

Technical Status  Confirmed Rally – Beginning Week 11

Other Observations

Market remains under a moderate level of DistributionLeadership has pulled back

Feel of the Market

Still undetermined: Is this the initial pullback or a longer correction? 

 Important Levels on Key Indices:



Last Close






Nasdaq 100




S&P 500









I would like to welcome you to the Klein Market Forum.  This Forum offers the opportunity to interact, grow, and learn, and in the process, the chance to improve investment performance.  The information in this forum is for informational use, and is not to be construed as investment advice.  Each investor is responsible for his or her own investment decisions and for seeking professional advice, where applicable.

Market Interpretation:

An initial pullback in a market rally is usually caused by an increased level of Distribution.  Many leading stocks touch their 10 Week Moving Average for the first time.  A typical initial pullback is 4-7% deep and lasts 3-4 weeks.  While it is certainly possible that the current pullback could develop into a more substantial correction, there is not yet enough evidence to conclude that the uptrend is over.

In this column, I deliberately focus on market action, and deemphasize economic fundamentals, politics and headlines.  The reason for this is that the market is the best mechanism for evaluating the relevance of such complex data.

Yet, as Jesse Livermore often suggested, the market is ultimately tied to economic conditions.  Current economic conditions have to be interpreted both domestically and globally.  Domestically, the presidential election presents the possibility of vastly different outcomes.  Among these is taxation, unemployment, and economic growth.  Furthermore, the Fed’s inflation policy benefits the stock market, real estate, and commodities.  However, without wage inflation, the middle class is being left behind.

These are also relevant on the global stage, where some European countries are in recession, and there is a slowing trend, as several governments are on the brink of insolvency because they spend more than they have.  Additionally, all growth numbers from the Chinese Government are suspect.

Even with such a slow economy, the reality is that defensive asset classes such as bonds present scant opportunities and the U.S. Stock market is priced modestly.

Joel’s Take:

This uptrend probably merits some level of exposure.  Recently, breakouts have continued, such as MA, some stocks have formed flat bases: LNKD and GPS; and still others have come under pressure, with some, such as AAPL testing its 10 Week MA for the first time.  The amount of progress that your account has made should determine your exposure level.  The cardinal rule is to avoid getting into a position where your account is vulnerable to substantial losses.

  • The Klein Market Summary is a professional interpretation of the general stock market conditions that is updated on a weekly basis.  Joel T. Klein is the portfolio manager of the investment partnership Blue Diamond Capital, LP. He writes the summary using select technical and fundamental data.  The Klein Market Summary is not intended to provide investment advice of any kind, and is only provided for the entertainment of the reader.  It is typically updated Monday morning, weekly.  Please e-mail info@kleinasset.com, if you are interested in receiving this free weekly update.
  • Past performance is not a guarantee of future results.  Due to market volatility, a fund’s performance may fluctuate.  Current performance may be less than previous results.  An investment a hedge fund when redeemed, may be worth more or less than the original cost.  Information above is not a replacement for the Fund’s prospectus.  This webpage does not constitute any kind of offer or solicitation.  Additional information on investment objectives and policies is in the Fund’s prospectus.  Ask your representative for a prospectus.

About kleinmarketforum

Klein Asset Management, LLC, formed in 2003, serves individual investors via a directional growth stock approach. When the market is in an uptrend, the firm seeks to exploit investment opportunities. When the trend is down or neutral, assets are protected. Klein Asset Management undertakes major market research projects. In many cases, these result in improved investment methods, which ultimately improve performance.

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