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Friday, March 11, 2011

Hmm, This Is Sooner Than I Thought

Last post I recommended waiting for a breakdown or breakout in the current market consolidation trend. When I posted it I assumed it would take until 3/18/11 until the consolidation pattern would break but this sure is happening fast. Yesterday 3/10/11 the market GOT HAMMERED, and the S&P 500 closed just under the important 1300 level. If the S&P 500 fails to close above the 1300 by 3/11/11 we have our breakdown in the current consolidation trend. The S&P 500 would be expected to fall to the next support level of 1275, and if it falls again, 1255. This could take weeks to a month to reach those levels and could indicate a move back down to 1200 level, putting a pause on the bull market until perhaps the end of summer.

We are looking for the market to close below 1300 by close of 3/11/11 which would indicate a breakdown in the current market. Current S&P futures indicate that today (3/11/11) is also going to be a pretty nasty day, and a breakdown is likely.

Btw the talking heads on CNBC are going to say its just a natural sell off following a nice long rally (as they assume everyone was in at the bottom).

P.S. The terrible tsunami is a reminder of how short our time on Earth is, today tell a loved one how much you care about them, I know I will.

Take Care Everyone,

Wednesday, March 9, 2011

The Bull Market Is 2 Years Old!

Happy 2nd Birthday Mr. Bull and since your birth on 3/9/09 we've had a terrific run with stock indexes such as the Dow, and the S&P double their values. This bull market was so strong that when compared to historical bull markets, is the strongest % gainers since the 30s (depression bounce, e.g. a bounce from $1 to $5 is a 400% gain. Happy Birthday Mr. Bull even though the entire rally during 09 was considered a counter trend rally and self proclaimed stock market geniuses advised to stay out. And finally in early May 2010, the bull market was welcomed and ordinary folks started to get back in the market, which of course prompted the flash crash. The stock market, post flash crash, once again became the land where no one returned alive until the bull market came roaring back in September of 2010. The rally that started September 2010 lasted The last week stock market price action has resembled consolidation, a big fancy term for (its moving sideways), which is usually followed by either a strong continuation of the previous trend (roaring bulls), or a reversal (ROAR ITS BEAR TIME). An interesting note is that the general market is losing momentum, which is indicative of a reversal. The Action Plan: We wait and look for a breakout to the upside or a breakdown to the downside in the current consolidation pattern, and position accordingly.

Remember do not just blindly listen to the guys on TV when they say the market has done very well and its time to believe the rally because its 2 years old and here to stay. When you listen to them, buy stocks and the market goes down 15%, they'll go back on TV and say, "The market has had a great run and this is a 'healthy correction'."

Friday, March 4, 2011

We Will Never Go Down *sarcasm*

The stock market has been on a tremendous rally since fall of last year. The stock market has transformed from a place where fear reigned into a magical paradise where stocks never go down. The lesson we learned from the flash crash on 5/6/10 is that we cannot afford to be complacent and lest we forget before the flash crash, everyone thought the market would rise straight to the moon. We need to remember that everything that goes up, must come down. With that preface lets analyze some stocks. WMT, MSFT, CSCO, T, HPQ, and MRK are the most prominent of the Dow laggards YTD and since they are not rising in this rally we should avoid them.. Gold and silver will lead commodities to move higher, however expect gold and silver to have terribly painful corrections.

The market may not crash tomorrow or the next week but the rally we are experiencing is simply unsustainable. Portfolios should be adjusted towards protecting against the downside risk via heavy cash, protective puts (if you understand how to use them) and investments in hard commodities such as gold and silver.

Yours Truly,
(The Jittery Bear)


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