Week of 8-9-2009

Timing Model = 2.0

90% long, 10% cash

Global allocation of long positions

MSCI EAFE Index 30%

MCCI Emerging Markets Index 45%

Russell 3000 Index - U.S. 25%

Top U.S. Sectors

U.S. Real Estate 3.0

U.S. Basic Materials 2.0

Precious Metals PMPIX 2.0

U.S. Oil Equipment, Services & Distribution 2.0

U.S. Banks 1.5

U.S. Financials 1.5

Top Intl. ETFs

MSCI Singapore Index Fund 2

MSCI Australia Index Fund 2

MSCI Brazil Index Fund 2

S&P Latin America 40 Index Fund 2

MSCI Spain Index Fund 2

FTSE/Xinhua China 25 Index Fund 2

MSCI Hong Kong Index Fund 2

MSCI All Country Asia ex Japan Index Fund 2

Strategy 3

Money Markets 9%

Emerging Markets 9%

Precious Metals 9%

Industrial Materials 9%

EAFE 9%

U.S. Large Cap 9%

International Real Estate 9%

U.S. REITs 9%

U.S. Small Caps 9%

Energy 9%

Agriculture 9%

Strategy 4

Money Markets 20%

Emerging Markets 20%

Precious Metals 20%

Industrial Materials 20%

U.S. REITs 20%

Sentiment has put enough pressure on my timing model to move it down a tick to +2.0, signaling 90% long. The technology sectors have fallen completely out of my top rankings and the latest momentum in Real Estate and Financials have made them leaders. Surprisingly Precious Metals are still a top ranked sector and asset class.

The equity markets still look ripe for a correction. The chart below illustrates a multi-month momentum divergence, and as I noted in an earlier post, divergences like this have a pretty good track record of forecasting market weakness. The next few weeks should be interesting.