Momentum Rider Trading: June 2012

Thursday, June 7, 2012

Managing Your Portfolio | Big Short Squeeze

Big Short Squeeze on Rumors | MR Investor Chart

The week started out badly on Monday as the S&P 500 sold down very close to our Sunday newsletter bounce forecast near 1260. It actually reached a low of 1266 so it didn’t quite get as low as we predicted but the market was technically way oversold and was ready to bounce up. There were far too many down days in May and the short sellers for the markets and the Euro currency had overstayed their time.

The big question was how the S&P 500 was going to act around the 200 and 250 SMAs which were very close to each other near 1283. Tuesday the market tested 1283 and closed at 1285. It was basically a pause day day but it had the shorts nervous. Then once the rumors of secret meetings between the US and Euro leaders hit Europe, along with some ECB rhetoric, the short squeeze kicked into action.

The rumors had nothing concrete or specific but the snap back up from being oversold and the auto-program technical buying and investor buying above the 200 SMA did the rest. It was a perfect environment to get a big technical bounce day. And as the day wore on, the Republican Governor blocked a pro-union recall vote which spurred on hopes of a Romney Republican boost for President. It was probably small but it could have added a bit to the rally.

It was a good tradeable rally for long swing traders as everything bounced across the board. But you need to put the one day move up in perspective. MR recommends using our MR Investor Chart (invaluable planning resource) to better help you navigate these news’ driven markets (see below). Note how the markets were on the brink of a major investor sell signal on Monday well below the 200 and 250 SMAs. The shakeout worked and the oversold bounce led to investor buys and auto-program buys today after getting above the 200 SMA. The subsequent short squeeze pushed the markets up much higher just underneath the 150 SMA level near 1,318 (2nd chart below).

Momentum Rider’s Key Investor Chart (Managing Your Portfolio vs. Moving Averages)

The S&P 500 closed today below its 20 and 150 SMA which are both near 1,318. Being below the 150 SMA on the S&P 500 is still bearish and it is also 46 points below the critical 50 SMA. Even a move back above 1325 is still in a caution area for investors with a recommended reduced equity exposure level (i.e. still below the 50 SMA)

The bulls will try to spin the Fed’s comments positively to push up towards the 50 SMA near 1360 and the bears will try to take the market back down to its 200 SMA at 1283 to erase today’s gains. The 20 SMA (1,318) can be a strong resistance trendline, especially when joined by another big moving average like the 150 SMA. It will be interesting trading in the next few days and into next week.

Investor Chart with Technical Analysis and Key Battle Levels:

Nothing fundamentally changed today except for a technical market bounce based on several rumors. Until details are provided by the Fed about QE3 or specific details are released about a European plan for their debt and banks, MR’s defensive and cautious position won’t change. For now, it was only one big short squeeze day from a very oversold condition that probably won’t have any legs. Only time will tell.

Investor Notes:

The caution alert for retirement accounts and investors is still present. Selling more equities to protect from more heavy selling is prudent at this time, especially if you can take advantage of selling at higher prices during a market bounce. Make sure to be ready to sell even more in case the Euro completely unravels and takes the markets down hard.

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Good luck in your trading and investing,

Keith Hugenberg

CEO Jalexa Trading Consultants, LLC

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This BLOG POST is brought to you by the publishers at Jalexa Trading Consultants, L.L.C. Nothing in this post should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. Any investments recommended in this blog post or through any of its advertisements should be made only after consulting with your investment professionals and only after reviewing the financial statements of the company or investment.

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Monday, June 4, 2012

Bear Market Is Here

Stock Market Cliff | Bear Market

Last week was a horrible week for markets and it ended on the worst day of the year in 2012. It is very bad fundamentally from a Europe debt and currency standpoint and from a slow growth and double dip recession view. Spain and Greece are in deep trouble and there don’t seem to be any strong and practical solutions coming forward anytime soon.

And, it is also in a very bad state based on the charts using technical analysis. Whenever a market loses more than 10%, it is a bear market by our standard. The S&P 500 has now lost 10.5% from the high on April 2, 2012. It is also extremely bearish when the markets close below their 200 and 250 SMAs. That happened on Friday on all 3 major US markets. The heavy selloff was fueled by a terrible US jobs report. The Labor Department reported the U.S. added a paltry 69,000 jobs last month falling well short of estimates calling for an increase of 160,000. The unemployment rate moved up from 8.1% to 8.2%.

The only ray of hope this week is that there is typically a bounce around these moving averages on the first level test so a few bulls may be lurking in the short term. However, if the markets close this week without the ability to get any buying above the 200 and 250 SMAs, then a repeat of the steep summer drops from 2010, 2011, and maybe even 2008 are likely and can’t be ruled out. From our studies in technical analysis, breaking through these 2 key moving averages can be like dropping off a cliff with quick and heavy selling pressure.

The Europeans are simply moving way too slow for investors. A big European meeting is happening at a June 28-29 EU summit, but that may be too late. German Chancellor Angela Merkel is now pressing for a central authority to manage euro area finances, and major new powers for the European Commission, European Parliament and European Court of Justice. She is also seeking a coordinated European approach to reforming labor markets, social security systems and tax policies. Until states agree to these steps, the officials say Berlin will refuse to consider other initiatives like joint euro zone bonds or a “banking union” with cross-border deposit guarantees. That kind of strong and unreasonable stance just won’t work for the markets. Finally, Germany’s insistence on gold bullion as collateral for supporting debt relief measures kicked off a strong gold rally on Friday.

The European politicians and the ECB need to act very soon if they want to help lessen the severity of what could be another financial collapse later this year or possibly much sooner. It is hard to predict at this point how it would compare to 2008 but it definitely will crush investors with too much equity exposure. It is not too early to start playing defense, raising more cash, and reducing equity risk.

As long as the Euro currency keeps falling and Europe has bank runs, stock markets are at a huge risk for a sharp selloff. It could happen anytime, it could involve a massive down day, and the depth could be 10% to 30% or more over the next several months if the right safety measures by the world’s central banks and funding organizations aren’t taken. Continue to RAISE CASH andREDUCE EQUITIES.

Here are the key levels for the S&P 500. More weakness this week could create a technical bounce between 1250 and 1260 but selling probably resumes after that without any positive European news.

More Selling Ahead:

Power Stock Picks:

MR is still looking at shorts. Here are a few more in addition to last week’s picks.

Investor Notes:

Gold and silver had strong bounces late last week and they may have higher to go in the short term. Oil is still looking for a bottom and investors can scale in on any more weakness a little at a time. The caution alert for retirement accounts and investors is still present. Selling more equities to protect from more heavy selling is prudent at this time, especially if you can take advantage of selling at higher prices during a market bounce. Make sure to be ready to sell even more in case the Euro completely unravels and takes the markets down hard.

To get our weekly TOP stock and ETF picks and detailed market commentary automatically sent to your email, enter your name and email address in the form below.

Check out our newest FREE promotional offer called the MR Market Crusher Pack for 2012 (click link). It includes 5 very valuable investor products worth $600 to get you started with a bang in 2012 for your retirement account.

To find out more about why our subscription services continue to crush the market since we started in 2004, go to www.momentumrider.com.

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Get instant access now to the MR “Gold Investor Membership”… get more info

_________________________________________________________

Good luck in your trading and investing,

Keith Hugenberg

CEO Jalexa Trading Consultants, LLC