Click chart to enlargeThis may be a bold move, but Tuesday, June 15th, we're going to sell just about everything. If you look at the chart that we posted on April 8th, we extended the lines out in such a way that the Dow would reach the 200dma sometime in June at a price of 8400 to 8700.
That's pretty much was has happened. But the eerieness of the predictive nature of that line drawing is not why we're selling.
We're selling because we're in a bear market, trending lower below a downtrending moving average and we just rallied back to the resistance line. We're by no means calling for the kind of plunge that we drew on that chart posted on April 8th. This is not meant to be an apocalyptic post calling for the end of the financial markets. That ship has sailed. We're not saying that the market is about to crash, but that we feel we've gotten to a point where the risk outweighs the reward. People have become complacent, and the fundamentals do not support complacency.
Sure the market could continue its run to 9500. But if it does, it's coming right back. So where's the gain? It's extended to a point now that a further rally would be excessive. Not impossible, just excessive.
Economists are calling for growth by the end of the year. We feel they are being too optimistic and setting us all up for disappointment. Gas prices are on the rise again, talk of higher interest rates has curbed spending, and the job market has yet to improve in a significant way. So where have we gotten since hitting bottom in February? Did we deserve the last 2,000 points? We happen to think we did, as the selloff was overdone. We just don't think we deserve another 1,000 points. Or even another 500 for that matter.
People are treating this market as if we're setting up for the next bull. We're nowhere near the next bull market. A bull market is not just an uptick in the stock charts. It's a whole new era in innovation, creativity, technology. When Al Gore invented the internet we had a bull market on our hands. This is NOT a bull market.
We're not suggesting anyone should follow us in selling everything. We just decided that it's time we start making bolder moves with our portfolios, and letting our gut have greater influence.
We continue to believe in our earlier forecast that the market will remain rangebound between 7000 and 9000 for the remainder of the year, and only slightly improved (7500 to 9500) throughout 2010.
So here we find ourselves at Dow 8600 weighing 400 points of upside against 1600 points of downside with the tune "you gotta know when to hold 'em, know when fold 'em, know when to walk away and know when to run" going through our heads. Thanks Kenny.
Sorry for not being more active blog authors. We do read the comments that everyone writes, but time constraints keep us from posting more often. There's also no need, as one post pointed out, to keep reminding everyone on a daily basis that the market is rangebound.
After selling tomorrow, we will likely post more often, as we'll be looking to get back in soon enough. Good luck!
23 comments:
P.S. The orange line on the chart is the exponential 200dma. The blue line is the simple 200dma. All that really matters is that we're in the area of these lines. No one should be splitting hairs.
Snot, you just made a great case for starting to hedge with some DXD or SDS if/when we get to DOW 9,000. Any chance you guys are thinking along the same lines?
Snot, how far does it need to drop before you will start buying back in. If it stops dropping before that point and appears to be forming a new temporary low, what will you do? Remain in cash or start buying back in at that level?
Funny, I actually turned around and went long as soon as SPX hit the 200dma. A bounce was in order. I did make one change to my strategy last week. I had been trading TZA off 950 SPX, did it 3 times. For the 4th iteration I switched over to EDZ. Now I'm in EDC. If SPX closes under the 200dma, I am out.
icon: i'm seeing the SPX 20dma at 925. are you expecting that to provide resistance and a bounce back down from there?
Something wierd is happening right now. The bottom fell out of MBS's and I dont know why. I dont like it, its enough to make me get out of my position right now. It's too much risk for 6 or 7 more measely handles on the S&P.
Gloom, despair, depression, agony . . . for all longs.
Snot has sold and gone to cash.
Icon has covered and gone long.
Can there be any worst scenario for longs than that?
lol in your dreams I'm long. But I am kicking myself a little bit for going with EDZ instead of FAZ. FAZ had the better day today.
In my dreams, birds daytrade.
It is deja vu all over again. I just bought into fertilizer for the first time since last August, I believe, by way of MOO and MOS. Am I stupid, premature, or just in time?
MOO chart
MOS/POT/AGU/CF all look about as good as it can get right now. I've got a 110 target on POT. That target price will drop $1 per day for the next week or so. I havent calculated a target for MOS but I'm sure it will top out around the same time POT does.
I was too busy to catch this one earlier but LDK created a buy signal on tuesday when it bounced off a convergence. I dont see any resistance below the 200dma. FSLR is very close to generating a buy signal. But it is currently under the influence of a strong sell signal. I believe it is taking a beating for purely technical reasons, and it may well likely go to the 200dma. If FSLR reaches the 200dma, it will be a very VERY good risk/reward play at 150 with a stop set to 146. (10% upside, 2% downside)
FSLR was given a downgrade, so it has nothing to do with "technicals". The "technicals" are reflecting the fundamentals.
http://finance.yahoo.com/q/ud?s=FSLR
But I agree that it will likely bounce soon, since it is the darling solar of the institutions.
Icon, you said that you went long. Then you denied that you went long. What are you now? Or does it change from day to day or hour to hour?
More and more indicators suggest a new bull market is approaching very soon. 50, 75 and 100 DMAs on indexes are rising. 125 DMA is flat or slightly rising, depending on the index. One sign of an approaching bull market is the golden cross in the indexes.
golden cross
golden cross in SPY
golden cross in QQQQ
almost there in DIA
Thoughts? Sarcastic, rude replies especially welcomed. :)
If Iconoclast421 had anything worthwhile to say about the stock market he'd create his own blog about it instead of hijacking someone else's.
As it stands he's Cliff Clavin. A know-it-all blowhard who can't DO, so he "teaches". LOLOL!!!
Do yourself a favor, don't take anything this guy posts seriously unless you enjoy watching your capital disappear.
so icon is hijacking someone elses blog becomes he comes here and shares his views on the market??? what is everyone else here then (besides snot)? guess everyone is a hijacker too, right?
at least icon comes here and shares his views on the markets, unlike you and the other icon bashers that come here to only bash icon & "warn" the rest of us not to listen to him.
my god man, do YOURSELF a favor and keep your drivel to yourself. please feel free to post your thoughts on the markets, but keep the slander to yourself. i mean honestly, can't you just agree to disagree w/icon instead of having to try and discredit him?
one thing i will definitely give icon credit for is he appears to speak his mind, regardless of what others may think of his point of view. right or wrong, it really isn't proven until the market reveals itself. no one knows for SURE what is going to happen, otherwise they would be rich and not following some blog named snotwheel! i think most come here (me included) just to read snot's point of view PLUS others perspectives. however, i certainly don't come here to read all the name calling posts....freakin ridiculous!
As the above person said, keep your name calling to yourself. I prefer to read what is said and make my own plans. Thank you.
I tend to agree with Joe that more and more indicators are turning longterm bullish.
First of all, for reference everyone needs to see this video:
A Simple Long-Term Timing Signal For The Markets
I assume everyone knows about this particular signal, but I'm just making sure. For the last few weeks I've been taking the weekly closing price data for SPX and rolling it into a spreadsheet. I created a chart that shows the 20 and 50 week moving averages. I've run through various scenarios to see what it would take to actually make those two moving averages cross and thus usher in a new bull market. Well, long story short, at this point it is nearly a mathematical certainty that these two lines will cross, and in less than 8 weeks.
Here are 4 simple scenarios based on SPX holding an average price level from now till the end of august.
As you can see, it will take quite a selloff to prevent this very reliable long term bull market indicator from producing a gigantic long term buy signal. In all likelihood the cross will occur on or around august 20th. Unless we crash, and crash hard. How big of a crash would we need to prevent the cross? Here's another two scenarios. In the first chart it shows that if SPX holds the current level of 920 until the end of july, then SPX will need to lose 50 points per week during august AND september in order to prevent the bullish crossover. How likely is that sort of crash? In the middle of summer? Not too likely. This creates quite the dilemma. Rather than indicating a new bull market, I think the only way to interpret this indicator, given the sorry state of the market, is as an indicator of an impending crash, one that is coming before october.
Bottom line: either this indicator is broken, we're gonna crash, or we're gonna have a new long term bull market based on some as-yet-unconceived new bubble while we are still struggling with the hangover from the last one. Mortgage non-payment bubble? The HideTheSausage bubble? We've got just a few weeks to figure it out. I'll be damned if I'm going to go longterm into anything until I understand the scheme. At least with the housing bubble the scheme was plausible. (Stupid, but doable.) I cant reach that same conclusion about the "nonpayment bubble" or the "permanent delinquency" bubble. Not yet anyway. When we start seeing banks giving out loans to people who defaulted on a mortgage owned by that very same bank, then the bubble will be confirmed!
Icon, the one thing that concerns me on the formation of the bullish golden crosses is the declining volume. The golden crosses may peter out and be leaning to the side, forming a low slung St. Andrew's cross instead of a "tau" cross. In other words, there may be no elevation, just sideways movement for a long time like Snot and so many others have predicted. Notice it on the 2nd chart in the following link. Although I think the line drawn from the March lows is poorly drawn on the S&P chart, the lower line on the volume chart is well worth noting.
S&P losing steam based on declining volume
Here is a fertilizer update from the fools:
update
Today MOS and POT are both up during this market setback on jobs numbers. A Yahoo message board poster says it has to do with a big India contract.
Najarian says another 10% to 15% correction in energy and emerging before it is time to buy.
link
What do you think Icon? My portfolio is pretty simple right now. SSO for USA; VEU for international; LTL for funny bids/asks (as Art Cashian would call them); 65% cash.
I had been buying lots of EDZ last week, wed and thur. I've been unloading as SPX dips down to the 200dma. This is the same basic strategy I've been using ever since SPX went over the big red line. I wouldnt be surprised if SPX bounced back up to around 915, but I'd be quaking in my boots if I was long anything beyond that point. I did go long once, but that was only because I figured the bounce would be big, and it was. I am not so enthused about the next bounce, if we get one at all I am betting it wont go beyond 915~920. We've got lower highs and lower lows. Everything points lower, except for the very real possibility of further fraudulent pumping. The more I read about what's going on, the more criminality I see, and this cannot continue indefinately, and it most certainly cannot end well.
I unloaded more of my longs for even money at the open and now I'm 86% cash and watching the market tank further. I don't see the conspiracies that you do, Icon. Sorry. The volume is low like that chart I noted a couple of messages ago. People are on the sidelines. Savings are up. Only thing that will bring people back in will be more positive forecasts during earnings season like the one from Fed Ex when they said business was starting to pick up. Since much of this tanking of the market over the last year has been deleveraging from ridiculous 30 and 40 to 1 ratios, it will be a long, long time before we ever get back to where we were. A relative of mine who is a manager in a hedge fund says that they never got above 1.3 leverage. Hopefully these hot-shot hedgies and financial managers won't get over-extended again. Hopefully they've learned their lessons after 2008.
Well if you arent seeing conspiracies and rackets popping up everywhere like weeds, then you arent looking. And more importantly if you're not seeing them then there is a whole hell of a lot you're not seeing, and it is going to cost you sooner or later. As it will everyone... 2 or 3 years from now people are going to be wondering what the hell happened, and why they werent warned. I'm here to say there was plenty of warning. But if you're not looking at the crimes being perpetrated today, or you cant comprehend what a crime is, then the aftereffects of all this rampant criminality are going to come as quite a shock.
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