Oversold Indicators turn Bullish 7/29/11

Our overbought/oversold indicators are turning bullish at current S&P levels.  The S&P currently stands at about 1296.  Our intermediate-term overbought/oversold indicators last triggered a "neutral" signal on June 24th, when the S&P was at 1282.  The market has been very volatile, with spikes in both directions -- based on news related to "debt talks" as well as the economy.  

Our long-term stock market models remain long.  The market will continue to be volatile -- as debt talks continue, the potential for credit downgrades "cast a shadow," and as the economy struggles to emerge from the recession.  

On the Budget, Default and Potential Downgrade

We normally focus on the technical moves within the financial markets, but enjoyed this article on the Washington "happenings."

Washington (CNN) -- With America now perilously close to default, here's where I sense we stand. My observations may be off as I have only had a brief time in Washington to take measure, but let me give it my best shot.

First off, the good news: The next several days are likely to be tortuous, but odds are shifting now in favor of a resolution that will prevent default. Behind the scenes, congressional leaders on both sides are talking to each other about ways out of this mess -- talks that are quiet, frequent and urgent.

Importantly, the two key plans now on the table -- one from House Speaker John Boehner, the other from Senate Majority Leader Harry Reid -- bear important similarities. Both are based squarely on spending cuts, and the Democrats aren't now pushing for tax increases. That makes it easier to find common ground.

Finally, there are hints that if a bipartisan deal is shaping up, President Barack Obama may be willing to accept an extension of the debt ceiling for a couple of weeks, give or take a bit. Default is still a serious threat, but there may be enough will and enough time to hammer out a compromise that both sides can swallow.

Read more here:

http://www.cnn.com/2011/OPINION/07/26/gergen.debt.solution/index.html?hpt=hp_t1

CNBC Explains: New Feature

Some good videos describing financial terms.  This features some of the work of Salman Khan -- and terms like contango, backwardation, mark-to-market & futures curves:

http://www.cnbc.com/id/41585735/

Article on Portfolio Optimization & Alternative Assets

Here's an article one of our contributors wrote on asset allocation, alternative investments, and ETFs.

The benefits of portfolio optimization and Modern Portfolio Theory are well-documented. In this article, we review a well-balanced portfolio and several low-fee ETFs that can be used to implement the asset mix.

Of particular interest, the portfolio mix includes an ETF allocation specializing in an “alternative investment” strategy. Alternative investment strategies such as “managed futures” are gaining in popularity because they offer increased diversification benefits – due to lower correlations – versus traditional assets such as stocks and bonds.

Please read more here:

http://seekingalpha.com/article/277851-a-well-balanced-portfolio-including-alternative-investment-etf-allocation