Wednesday, December 21, 2011

Welcome to the ETF Maximizer Blog

Our sincere welcome to the first distribution of the ETF Maximizer Blog! 

This blog will complement the ETF Maximizer Newsletter with frequent updates including views on the market, introduction and application of new analysis methods and other information of keen interest to the subscribers of the ETF Maximizer Newsletter and others with an interest in ETF investing.             

The blog is open to the public and the link to it may be distributed freely.  (

To become a Follower to this blog simply fill in your email address in the Follower section in the upper right hand corner.  You will receive a confirmation email that you will need to respond to for completion of the process. That’s it.  The blogging software will automatically send you an email any day that new articles are posted (but, of course, will not send emails on days new articles are not posted).  

Just a note that we have done our "due diligence" in choosing this approach for more frequent information to those interested in ETF investing. We've examined the pros and cons of various of approaches including Twitter, Facebook, Linkedin, etc, etc. We're now 100% convinced that for this objective, this approach will provide the most useful information in the timeliest manner with the least disruption. 

We look forward to having you join as a Follower.  Please drop us a line anytime you have suggestions for topics or enhancements to the blog.

Our very best regards, 
The 401k Maximizer Team

Tactical Diversity Speedometer -- Defined

We are constantly developing clear and concise ways to communicate current levels of market risk to our subscribers. We understand that return of your capital is just as important as the return on your capital. So, we cannot stress enough how important it is to be aware of market Risks before making an investment decision.

As most of our subscribers are aware we completed an extensive development process which enhanced greatly our ETF models in 2010. Clearly, this work has paid off when one considers all of our outperforming ETF portfolios this past year versus the performance of the major indexes and when compared with other competing approaches!

One of the key observations during this systems development work was that when we ran the software models on the entire universe of Exchange Traded Funds during a healthy market period some 40 to 50 to several hundred ETFs would pass all of our screening criteria for Buys.  But when we ran the same software models as market volatility increased, the number of funds passing the screens would dwindle to a handful and occasionally to none. This means that out of our universe of close to 1,000 Exchange Traded Funds not one would pass our screening criteria during a high volatility or down market period. This is the sign of a very, very dangerous market. Whenever the number passing the Buy screens went from a high number to a very low number in a short period bad things often happened in the market.

Then, we went one significant step forward with this development and focused on how many Sectors were currently passing our buy considerations. Consequently, we decided to create a speedometer so to speak (we call it the Tactical Diversity Speedometer) to show you the percent of all Sectors that are passing all of our buying considerations and therefore how much risk there is the market.

An important note on how we define “Sectors”.  These groupings of ETFs are calculated by examining all the intercorrelations among the nearly 1,000 ETFs.  Then grouping together those with high intercorrelations and selecting a “representative” for the group.  These “representatives” then comprise a set of “relatively uncorrelated sectors”.  It’s these relatively uncorrelated sectors that we examine to see how many pass all of our Buying considerations! (This work is computational intensive and is carried out with proprietary algorithms developed by our firm.)

Our observations have been that when only a handful or these Sectors pass the screening criteria it’s time to get very, very conservative with your investment choices.  But when 20% or more Sectors pass the screening criteria the market is healthy and therefore it is safer to pursue riskier investments. And obviously, the higher the speed of the Speedometer the healthier the market is.

It doesn't strictly mean that when only a sector or two pass the buy filters that one cannot make money in the markets; it simply means that the markets are not robust when such a low number of Sectors are in a buy mode.

On the title "Tactical Diversity Speedometer" --- "Tactical" because it focuses on a relatively recent time-frame; "Diversity" because it analyses 'Relatively Uncorrelated Sectors", thus groups of ETFs which are statistically 'diverse' and "Speedometer" because we display the 'speed' or the 'health' of the overall market and discuss both the current speed and the rate of increase or decrease.

The Tactical Diversity Speedometer is a way for our readers and subscribers to see the current level of market risk at a quick glance!

Here are some visually striking examples:

Beginning of a Healthy Market

Super Healthy Market

Un-Healthy Market!

Tuesday, December 20, 2011

Short And Medium Term Prospects For Silver And Gold

You may be very interested in a new article by Scott Gibson with 401k Maximizer posted today on the Seeking Alpha Blog.  Here's the title and the link:

Short And Medium Term Prospects For Silver And Gold
The 401k Maximizer Team

Monday, December 19, 2011

Silver and Gold are Breaking Down

You may be very interested in a new article by Scott Gibson with 401k Maximizer posted on the Seeking Alpha Blog. Here's the title and the link:

Silver and Gold are Breaking Down


The 401kMaximizer Team

Sunday, December 18, 2011

Tuesday, November 8, 2011

The Bullish Argument for Silver

Scott Gibson

The price of silver has been in a slow steady recovery since it gapped down in hard selling on September 22’nd and 23’rd of 2011. From a technical standpoint, price needs to fill the gaps and close above $38.34 before many investors are going to trend back into the water. But more aggressive investors may want to consider the following and start taking positions now.

Silver has been tracking up a regression channel since 9/26/2011 where the regression line defining the channel is gaining around $2 per month. SLV, the silver Exchange Traded Fund, has gain 10.74% in price since 9/26/2011. As the chart below shows, the price has almost filled in to the low of the second gap bar of $34.51. If the first gap bar is filled over the coming months it will take silver back up to $38.34. That price point is shown with the solid horizontal blue line on the chart. Right now, based upon the slope of the regression line, we may see the first gap filled by sometime in January.

The indicator shown on the chart below (click on the image to see it more clearly) the price bars is a consensus of 6 different measures of price movement along with volume momentum. When the green line is above the red line the indicator shows that silver is in an uptrend, or as we like to say has a positive bias.

From a fundamental perspective the Chairman of the Federal Reserve, Ben Bernanke, has signaled that additional monetary stimulus may be needed in February to lower the U.S. unemployment rate. This is the first break in the dam that the Fed is considering QE 3. The bottom line is that more dollars will be created to “stimulate” the economy. Anticipation of this move may already be showing up in the trend divergence between UUP and UDN, the Exchange Traded Funds that represent dollar bull and dollar bear. Since silver bottomed on 9/26/2011, UUP has lost 2.21% while UDN has gained 2.20%. This divergence reflects a weaker dollar.
Dollar weakness adds more support to the bullish case for silver. Silver (SLV) and gold (GLD) have rallied strongly during each of the previous periods of Quantitative Easing. Once the Fed gins up its printing presses it’s reasonable to expect that precious metals like silver will trend a lot higher and possibly take out or approach its April 2011 high of $48.35.

So how does a patient investor take advantage of all of this information? If you already own silver you may want to sell covered calls 2 standard deviations above the price regression line. Currently, November calls with a 36 strike price are selling for 0.30 which is close to a 1% return on your money during the next 2 weeks (these options have an expiration date of November 19, or 10 market days away). If silver closes above the 36 strike price at options expiration your return is 9.3% and your position will be called away.

For those investors who do not own silver but want to start accumulating a position at a good price you can sell naked puts with a strike price of $32 for $0.72 which gives you an actual purchase price of $31.28 ($32.00 - $0.72 = $31.28) if you are filled by the options expiration date (November 19’th). $31.28 is a price that is very close to the bottom standard deviation band shown on the chart. If you are not filled (meaning that silver closes at or above $32 at options expiration), you pocket the $0.72 and do it all over again in December, January, etc. until you are filled. Just remember that each option position represent 100 shares of the underlying, therefore if you sell 10 puts with a $32 strike price and are filled (which would happen if silver closed at or below $32 at options expiration) you will have purchased 1000 shares of silver for $31,280. If you are filled by the $32 strike, with an effective purchase price of $31.28, you are purchasing silver 6% below Friday’s close of $33.20.

On the other hand, if you sell 10 of the $32 strikes and silver closes at or above $32 at options expiration you will pocket $720.