USA Financials: Corporate Bonds, Technology, and Gold

Finance Portfolio Research & Analysis for Sept. 8-12, 2008

From our foundational USA research division and the subsequent USA strategy analysts, the following financial analysis excerpts are from revisions recently completed on USA based investment portfolios:

SCR Step 1 - Analysis: From No. D1 (USA) Financial Portfolio Research Revision –
[iShares] G. Sachs Invest Top Corporate Bond (LQD) vs. [iShares] High Yield Corporate Bond (HYG):
(1) Observation - Relative Strength: Results in the relative strength analysis of LQD versus HYG indicate that the Top Corporate Bond (LQD) is outperforming / neutral to High Yield Corporate Bond (HYG) on a relative basis. This is a continuation that began in late July. The importance of this relative strength change is that it is with a positive / neutral price path for LQD. The increase in relative strength during much of June and July was from the price path of LQD simply not dropping as fast as the one for HYG.
(2) Observation - Regression: Comparison of the linear regression to the time-series that has a 3-period forward shift finds the following formation: Both the price path and the linear regression is equal to the time-series. Since the linear regression provides the "best fit" to the price path, this has neutral implications for Top Corporate Bond (LQD). However, and of concern, is the weakness of some of the indicators.
(3) Observation - Price Performance: LQD shows a continuation of a neutral price path (producing a fairly flat overall slope) on weak indicators.
[Reference Charts: D1-1 (relative strength); AD1A-1a (regression); AD1B-1b (price)]
SCR Step 2 - Implication & Strategy:
(1) Possible Implication: The summary of the stated observations for LQD is Neutral, and has Neutral implications.

SCR Step 1 - Analysis: From No. D2 (USA) Financial Portfolio Research Revision –
[iShares (Wgt: MC)] G. Sachs Technology Index (IGM) vs. [SPDR (Wgt: MC)] S&P 500 (SPY):
(1) Observation - Relative Strength: Results in the relative strength analysis of G. Sachs Technology Index (IGM) versus S&P 500 (SPY) indicate that the IGM is negative to SPY on a relative basis since the middle of August.
(2) Observation - Regression: Comparison of the linear regression to the time-series that has a 3-period forward shift finds the following formation: The linear regression is below the time-series and the price path is currently below both. Since the linear regression provides the "best fit" to the price path, this has negative implications for IGM.
(3) Observation - Price Performance: G. Sachs Technology Index (IGM) shows a shift from a neutral price path to a negative one (downward slope); however, this observation is still on fairly weak indicators. We are seeing the same observation on Semiconductor-G. Sachs (IGW), but with stronger indicators.
[Reference Charts: D2-2 (relative strength); AD2A-2a (regression); AD2B-2b (price)]
SCR Step 2 - Implication & Strategy:
(1) Possible Implication: The summary of the stated observations for IGM is Negative, and has Negative implications. Be careful if you choose to short IGM because the technology sector is know to turning quickly on good economic news.

SCR Step 1 - Analysis: From No. D3 (USA) Financial Portfolio Research Revision –
[PowerShares (Wgt: MC)] Gold-Deutsche Bank (DGL) vs. [PowerShares (Wgt: MC)] Commodity Index (DBC):
(1) Observation - Relative Strength: Results in the relative strength analysis of Gold-Deutsche Bank (DGL) versus Commodity Index (DBC) indicate that DGL is neutral / negative to DBC on a relative basis.
(2) Observation - Regression: Comparison of the linear regression to the time-series that has a 3-period forward shift finds the following formation: The linear regression is below the time-series and the price path is below both. Since the linear regression provides the "best fit" to the price path, this has negative implications for DGL. After a three week neutral pause, this is a resumption of a decline that began mid-July.
(3) Observation - Price Performance: Gold-Deutsche Bank (DGL) shows a continuation of a negative price path (downward slope) on some fairly strong indicators.
[Reference Charts: D3-3 (relative strength); AD3A-3a (regression); AD3B-3b (price)]
SCR Step 2 - Implication & Strategy:
(1) Possible Implication: The summary of the stated observations for DGL is Negative, and has Bearish implications.

Additional considerations:
First, for most investors, a diversified investment portfolio approach combining stocks, bonds, money market securities, etc., is optimal. While financial diversification cannot protect against a loss from a declining market, it can reduce the volatility of the overall portfolio.

Second, with the globalization of information technologies, college education becomes a prerequisite to most careers. Thus, a goal of successful investing in a variety of assets becomes crucial in providing the upper level education necessary for the future of your children. In consideration of that goal, studying the information available on this site, which has been kind enough to host our research in this article, will help. At www.StrategicCapitalResearch.com, we provide additional finance educational materials to what you find here in both investment books and videos. Between the two sites, you should be able to find enough information to get started toward achieving your education investment goals.

Third, to the above analysis excerpt, the usual disclaimers apply. Since all Strategic Capital Research publications provide research that is conducted using historical data, a reminder needs to be made that the analysis of past market reactions cannot predict future market actions. In particular, no amount of historical data can predict the sudden changes that occasionally occur in financial markets. Finally, the reference chart numbers refer to both the portfolios and their completed auxiliary analyses that are located at www.strategiccapitalresearch.com/research.html.