The Bear Market Continues

Monday 9/22/08 SPY @ 121.31.

There is nothing reassuring in the government-mandated short-covering rally that occurred at the end of last week.  We remain in a dire financial situation, the extent of which no one seems to know.  The smartest guys in the room (whose compensation seems to remain politically untouchable) managed to blow up firms that have survived wars, depressions, crashes, disaster, but could not survive an incompetent Republican administration whose contempt for government became a self-fulfilling prophecy.   The systematic defunding of our public infrastructure, from the people who inspect and maintain our levees and bridges to the people who are supposed to be enforcing our securities laws, is now coming home to roost.  

The closest we have come to this crisis is at the end of another corrupt Republican regime that lied about about a land war in Asia:  the end of the Nixon administration ushered in an enormous loss of confidence in all things American - check out the 1973-4 bear market.  

Will it be as bad today?  I don't know, nor does anyone else.  I just follow the trends.  

Keep selling the SPY.  Shed any speculative long positions.  

Buy GLD.

Buy DOG (the inverse of the Dow).  

The fed clearly does not know what it is doing, and has abandoned any principle, bailing out one institution one day, letting another fail the next.  This Suharto-style of short-selling-banning is the kind of economic idiocy I thought those Street-savvy Republicans were too smart to fall for... oh, well, on yet another front, these guys are proving an enormous failure. 

You can't spin a war, a hurricane, or a financial meltdown.  It's time for grown-ups to be in charge.  Let's send these clowns home in November and let our government be run by people who understand what Lincoln really meant by of the people, by the people, and for the people.  Not the lobbyists, or the neocons, or the Abramoff-Delay-Cunningham-Bush-Cheney-Libby-Chalabi (remember Chalabi?) crowd, but the people.  That's us.  It's our country and it's time we took it back.  You can't spend it if you didn't earn it, and yes, government costs money and if you make more, you should be prepared to spend more in dues for living in a civil society.  Freedom isn't free.  We can't just go shopping to get out of this mess.  

If anyone votes for More of the Same McCain or Thanks but No Thanks Palin, then you really have not been paying attention to the damage their ideas have caused.  Insanity is just doing the same thing over and over again and expecting different results.   By that definition, a vote for McCain is truly insane.  

Send these guys home.

Don't Panic... But Quietly Move Toward the Nearest Exit...

Monday 9/15/08.  SPY @ 120.00.   Today, the market got hammered, with the Dow selling off over 500 points and the S&P 500 off almost 5%.    A chart of the S&P 500 Depository Receipts (SPY) indicates why the trend is your friend and bottom-fishing is an expensive sport (click on the chart to enlarge it).  

  The market peaked at around 144 in May, then issued a sell signal at 137 and change when the 20 day trailing low was punctured to the downside. This short trade was profitably closed when the 20 day high was taken out in August at 129, an 8 point short sale.

  Had you reversed (as you should), you would have been stopped out at 126 when the 20 day low was violated.  

Stock charts update

Stock charts update

9/8/08
SPY @ 127.27:  Spiders are in a sell state since a sell stop was hit at 126 only two trading days ago and 1.3 points away.

The market surged 2% today but closed off of its highs and is in the middle of its four-week range between 131 and 122.

Note that the volume on today's surge was less than that of the selloff of only two days ago.

The July low of 120 was approached; the low of the most recent move was 122.

Buy stop is at 131.5 but will soon dropped to the 131 area.

Spiders trade above the 50 day moving average (127) but far below the 150 day (132). 

Spiders sold off from a high of 144 in mid-May to 120 in mid-July, a decline of 17%. A sell signal from 137 would have been profitable with an exit at around 129.5, a short profit of about  6%.

This would have been followed by a3 point loss to be stopped out at 126.

Gold ishares (GLD) @ 78.9 remain in a sell state since 90. They are currently at 78.9 after a recent spike high to above 84. They gapped up and then gapped down and looked headed toward their recent lows of 76.61. A buy signal would not be given until 86.9, their 20 day trailing high.
The 50 day is below the 150 day moving average (87 below 89).

Homebuilders ETF.   On August 22, I wrote that "homebuilders ETF is looking bullish. At 19, it's punched above its recent 20 day high of 19.24 only to settle back to 17.5, before rallying the last 2 trading days to 19.. Note it is in a buy state since 18.75 in mid-July. After exceeding this amount, it pulled back into its trading range, formed a flag in the upper end of it, and seems to have broken out again."

Since then, the home builders have broken out on huge volume at  22.8 but then closed back in their trading range at 22.6 up 3.8 percent for the day.  The sell stop is at 19.6.

 The most recent low is at 18.5.  
The 4 week low jumped to 17.5 and should head higher soon. 

XLY, consumer discretionary spiders @ 31.7 have stalled a bit following their decisive breakout, pulling back from a high of 32 to a recent low of 29.4 before closing today at 31.7, near their twenty day high of  31.9.

Current buy state is long since 29.9 or so, following a protracted decline from a high of 33.5 as recently as May. It declined from 33.5 to 26.0, its mid-July low. 

Sell stop is at 29.0, 3 points (10 per cent) away.

XLP, consumer staples spider, continue to surge higher after breaking out at 27.5, now at 28.9 with a 20 day low of 27.8 after a pullback to below 28 last week. 

XLV, health care spiders @ 32.3,  hit a sell stop last week at about 32.4, closing a profitable trade from 31.4 in early July. 

4 week high is at 33.7. 

XLF, the financials @ 22.7, broke out after a dramatic past two months.  They stalled three times in the 23 area. They sold off to below 20, where they tripped a sell stop in mid-August.

They surged 4.3 percent today, breaking out above their 20 day high of 22.8, but then settled back to close in their trading range.  

There was a dramatic 6-day surge from 17 to 23 (35% rise) in July, following a plunge from 28 in May to below 17in July.

 
XLB, the materials spiders @ 37.2 remain in a sell state and downtrend since their high over 46 in May. Their sell state is short since just below 43 with a buy stop just above 40.2, but they look headed lower, closing down .19% on a strong up day for the rest of the market.

XLU, utitilities @ 36.3, are also in a down state after triggering a false buy signal at 38.4 that led to a 2-point loss in three days, closing out at 36.5!  

They were at 41.5 in June, but a sell signal was given at just above 40. 

XLI, industrial spiders are also in a buy state, since a dramatic decline from 40 to 32.5 from May to mid-July. Most recent buy signal was at 35.4. Sell signal at 33.7.

RSX, Market Vectors Russia @ 34.5, remains very bearish, since a short signal from 54.5, representing a 37% open profit.  it is noteworthy that since the sell signal was generated in June, RSX has never traded above even the middle of its 20 day range. Buy stop is at 42.6 and plunging.  

Bottom line:  the trend remains your friend.  Don't try to guess a bottom!  Just adapt to what the market is telling you and let it ride...