Market Comment 06 11 2011

The S&P 500 index is roughly 20 points north of the widely watched 200 day moving average. The 200 DMA is also in the vacinity of the March 2011 lows, which may act as a strong support area. If the market does in fact decline to this level we would expect to see a strong bounce off support.

(Click on chart for easier viewing)

This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.

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Dipping Our Toes Back in the Water 06 10 2011

The market is now in an extremely oversold condition after an S&P 500 decline of over 6% as I write and the small caps (iwm) are down about 9% since April 28th. The markets have now endured roughly six weeks of declines.

We have managed to shield our accounts from much of this pain by going largely to cash. Markets rarely go straight down. When investor sentiment reaches extremes and stocks become extremely oversold the large players begin to quietly accumulate stocks. According to our "Effective Volume" studies we are reaching the point where there is a likelihood of, if not a short term trend reversal, at least a short term bounce.

I have begun to dip our toes back in the water with equity purchases in the beaten-down sectors, i.e., small caps (IWM) and a small amount in materials and energy. We may be a little early, but scaling back in at these levels seems to make sense from a risk/return perspective.

Market Comment 06 07 2011

The S&P 500 breached the 1295 support zone today. The market is now in oversold territory. Furthermore, negative sentiment is reaching an extreme. In the past these elements when combined acted as catalyst for producing either a bounce or a trend reversal.

The previous bounce turned out to be a bull trap. It popped up briefly, drawing in buyers, only to quickly reverse course again.

The nature of the coming bounce should be very telling. We will remain defensive until we gain more clarity.

This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.



Current Outlook 06 05 2011

The market has now fallen for five straight weeks. The chart below indicates that the S&P 500 is at the critical support level right now. A push below the April lows, around the 1297 level, would indicate a potential further drop to the March lows of 1250.

The economic headline news has been horrible. As you have no doubt heard on the news, the US economy is slowing and jobs for Americans remain a big problem.While a deal to bail out Greece has been struck it appears that the cost was under-estimated; instead of 60 to 80 Billion it now looks more like 100 Billion.

The large candlesticks on volume in the chart below indicates that the institutions are in sell mode; this is confirmed by our Effective Volume studies. It is never a good idea to bet against the big money.

Much damage has been done to market structure and it will take time to play itself out. It may very well take much of the summer for the market to build a base.

Risk is very high at the moment. We currently have minimal exposure to stocks and high yield bonds. There are times when it is best to simply remain on the sidelines.

This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.

Bad Economic News Fueling Market Volatility

It has really been a tough week for the market. The markets have suffered from a litany of bad economic news:


April Factory Orders were Down

The March Case/Shiller Housing was Down

The May Chicago PMI was Down

May Consumer Confidence was Down

May ADP Employment was Down

May Motor Vehicles Sales were Down

May ISM was Down

Weekly Unemployment was slightly improved but not as much as expected

In addition to downgrading Greece’s creditworthiness, Moody's is also threatening to put the U.S. on credit review if no debt reduction agreement is reached.

On Friday morning we may see some real volatility in the market if the highly anticipated non-farm payroll numbers disappoint in a big way.

After being stopped out on a large part of our positions we can safely watch from the sidelines as mere observers. We can get re-invested as the market begins to show signs of stability again.

This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.



Short-term Stops Hit

The following short-term smart stops were hit. (indicated by red flags) Per my risk management discipline the related positions were sold today.

(Click on chart for easier viewing)

This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.

Market Comment 06 01 11

Investors Business Daily's "Market in Uptrend Call" was sabotaged by the release of worse than expected numbers in the ISM survey report today.  The Institute for Supply Management's index, a gauge of national manufacturing activity, slipped to 53.5 for May, down sharply from 60.4 and below expectations of 57.6. The employment report is due out tomorrow. Based on the ISM report, estimates for job gains are being slashed. Additionally, Standard and Poors downgraded Greek Debt.

I did add to equity positions after the initial 150 Dow point dip. I may have to re-assess this move if we don't get a bounce tomorrow.

This blog post does not constitute an offer of investment advise. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.

 

 

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