Momentum Rider Trading: selling

Showing posts with label selling. Show all posts

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

________________________________________________________________

© 2012 Jalexa Trading Consultants, LLC. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the internet), in whole or in part, is strictly prohibited without the express written permission of Jalexa Trading Consultants, LLC.

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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_________________________________________________________

Good luck in your trading and investing,

Keith Hugenberg

CEO Jalexa Trading Consultants, LLC

Friday, May 18, 2012

Stock Market Caution Alert

Stock Market Update Caution Alert

Gold and silver bounced up today as we expected from being oversold and with some short covering. Hopefully they are putting in a bottom and base now. Natural gas sold off early but recovered and unleaded gasoline and WTI Crude Oil held steady. We are still looking for a bounce for gas and oil fairly soon as well.

As for the US markets, the DJIA was up almost 90 points in the futures last night and a good bounce seemed likely today. Unfortunately more scares of runs on European banks and poor US domestic data this morning gave the short sellers ammunition. The very oversold markets continued to move towards the support target we expected near 1,300 on the S&P 500 – just much faster than anticipated.

The problem now is that there are very few buyers willing to step in front of the cascade down. It has the earmarks of some panic selling from funds to avoid the big 6 week stock market losses that we had the last 2 years (May 1 to June 16).

The only positive as we indicated last night is that our oversold indicators are hitting the buy triggers that could start a short squeeze back up starting tomorrow. But the weekend is always dangerous to hold longs with this negative cycle in place.

Facebook’s IPO could help trigger some upside stock market momentum tomorrow but our S&P 500 forecast points to a move lower to the 1,285 to 1,275 area (1,279 is the 200 SMA and next strong support). That would complete the Head and Shoulders Pattern retrace that we have been showing on charts for several weeks. It may happen next week without any good European news – like guaranteed deposits in banks, etc.

We wish we had better news but the Eurozone is unraveling and there doesn’t seem to be any answer close at hand. It could get much worse from here so scaling back even more on your equity exposure on any bounce is recommended. Cash is always a good position until more certainty comes in.

STOCK MARKET CAUTION IS WARRANTED FOR NOW!

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_________________________________________________________

Good luck in your trading and investing,

Keith Hugenberg

CEO Jalexa Trading Consultants, LLC

________________________________________________________________

Head and Shoulders Pattern | May Selling

Another Technical Analysis Lesson – Head and Shoulders Pattern

Note: Reprinted from April 25, 2012 - Wouldn't this be useful to know for your trading and investing? This forecast was dead on the money.

MR’s forecast of more market chop around the 50 SMA this week has played out so far. The criss-cross of the 50 SMA happened for the 10^th time today on the S&P 500 in 12 days. Our bias was bearish going into the week on Sunday night and Monday was down 185 Dow points near its low. Since then, it did bounce up off that low and actually finished back above its 20 and 50 SMA today after Apple’s blowout surprise earnings. And yes, the heavy selling in Apple Inc. going into earnings clearly had the analysts and many short sellers caught on the wrong side.

At this point, the three major US markets were able to recapture their key 50 SMAs as well as their most important breakout levels from the last 30 days. COMP at 3,029 (>3,000); S&P 500 at 1,390 (> 1,375); and DJIA at 13,090 (>13,000). However, the markets were on the brink of a big selloff and technical breakdown on Monday (see later chart). The only savior was Apple’s blowout earnings today which caused yet another short squeeze up for the markets.

The chart from Sunday’s newsletter is still valid even after today’s strong close at 1390.

Bullish Above 1400 and Bearish Below 1370

Technical Analysis – May Selling Could Be Coming Again with a Head and Shoulders Breakdown

The markets were on the brink of a big technical breakdown from a Head and Shoulder’s pattern (see graph below from Monday) but they survived with Apple’s help. We have outlined this pattern numerous times before and recently showed a bullish Inverse Head and Shoulders pattern that could be forming in gold and silver (Technical Analysis | Gold and Silver).

Taking a look at the graph below, the neckline was briefly breached on Monday but the market was able to recover back above it. If the neckline is eventually breached with volume and momentum, the lower target is a 6% drop down to 1283 on the S&P 500 (8% from here). The neckline is around the 1368 to 1371 level now.

A Confirmed Neckline Breakdown Is Probable for May

The reason for our bearish bias going into May has been made clear before in our recent newsletters. A breakdown could repeat again in May based on the last 2 years’ history in 2010 and 2011 as the charts show below. Here are the charts from the last 2 years for the 6 week period from late April to the middle part of June.

Big Selling in May and Early June 2010 (15% Loss)

Big Selling in May and Early June 2011 (8% Loss)

The institutions have been burned badly the last two years in May and will surely protect this time around on any hint that a downtrend is starting again. In fact, had Apple missed its earnings last night, there is no doubt the heavy selling would already be in full swing going into May.

The bottom line is that we continue to stress caution and recommend fewer equities here. There is an increased downside risk based on recent past history and the Head and Shoulders pattern shown above.

For now we will wait to post more of our HOT Stocks in the momentum stock investor series. For the power stock picks tonight, MR is going to select 10 shorts that could fall quickly if selling kicks in again and into May as history would predict.

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.

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_________________________________________________________

Good luck in your trading and investing,

Keith Hugenberg

CEO Jalexa Trading Consultants, LLC

________________________________________________________________

Monday, February 13, 2012

Bear Market Warning

Baltic Dry Index Forecasting a Market Pullback

The last three days were pause days that amounted to very little movement. The S&P 500 moved up just 5 points to the 1350 area and the DJIA moved up only 22 points. It is harder to get a bullish catalyst after moving up so far and so fast.

We are still waiting to see what happens during a pullback on volume and how far the markets fall. The first S&P 500 support is the 10 SMA at 1333 and then the 20 SMA at about 1318. Strong bull markets usually hold the 10 SMA or the 20 SMA on a retracement and that is what we expect. There have been lots of put options purchased for protection with the low VIX. That should help support the markets on any selling momentum and it will minimize the damage. The next stop if they don't hold is near the 1305 to 1300 level.
At this point, unless Greece cannot get their agreement or something happens with Iran, the pullback is probably going to be limited to the 2 to 4% range initially.

However, the earnings have not been very good in terms of growth. In fact, if you pull out Apple's earnings in 2011 from the S&P 500, the growth was less than 3%. And the earnings growth slid from over 18% in Q3 2011 to under 6% in Q4 2011. The earnings growth is slowing despite many of the earnings beats this season. So even with the better "reported" employment numbers, the better manufacturing data, and improving consumer confidence, the earnings growth is ultimately what drives the markets. After this earnings season, the markets are potentially set up for a much bigger pullback (see bearish indicator watch below).

So far Apple Inc (AAPL) has served as a good "canary in the coal mine" for the markets and for the big money players. When AAPL starts pulling back, the markets will probably follow along with it.

Bearish Indicator Watch: MR has previously detailed numerous leading indicators and metrics that we watch every week to help forecast future moves. But one we didn't talk about recently is called the Baltic Dry Index. This is a number issued by London that tracks worldwide international shipping prices of various dry bulk cargos.

The index provides a measure of price for moving dry raw materials by sea - coal, iron ore, grain, etc. Just recently, as shown below, it hit a 25 year low. In January of this year, it had its worst decline since it began recording prices back in 1985. The fast and steep drop from mid October 2011 till now is astounding.

As an example, the large freighters have been forced to charge less than half of the price they did just 6 weeks ago. The situation is so bad that the rates have fallen over 60% in the last 2 months and they are now below operating costs in some cases.

This Baltic Dry Index has been a solid forecasting indicator for predicting slowing economies and even for recessions. For example, it fell sharply in early 2008 and we all know what happened the rest of that year. Now MR is not predicting a repeat of 2008 by any means.

But this indicator certainly is suggesting that Europe and the world economies may be slowing down faster than many people are currently factoring into the stock markets. While this index is falling like a rock, the markets are in a steep climb. This divergence probably means that falling earnings growth and a European recession could ripple through to cause a much bigger market pullback (6%+) in the second or third quarters. This index is worth watching.

There will be no power picks tonight based on the unsigned Greece agreement and the extended market. We will reassess recommendations this weekend based on the next few day's market action.

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

Advertisement:
Investors can take advantage of our best investor services in our premium Gold Investor Membership. Get access to the top Momentum Rider investor portfolios, Special Reports, and stock picks by trying it out risk free for a few months. 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

________________________________________________________________

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.

© 2012 Jalexa Trading Consultants, LLC. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the internet), in whole or in part, is strictly prohibited without the express written permission of Jalexa Trading Consultants, LLC.