Welcome new reader!

Financial news I consider important, with my opinion, which is worth as much as you paid for it.
Please click HERE to read a synopsis of my view of the financial situation.

Monday, July 6, 2009

Head and Shoulders

As I blogged last week, some of the stock chartists are pointing to a head and shoulders pattern, that once completed, indicates the market will fall.

Let's take a look at that chart again:

Now, lets look at what we have today:

From WebSurfinMurf's Financial Blog

The chart I posted with "future predictions" looks like the market is playing out what was predicted. However, I am not sold that the market isn't in "sell off mode" until the SPX closes below 880 with conviction. The problem is, anyone looking at these charts will agree with me - even the bulls - that a close below there is bad news for the market.

So here goes another "prediction". The day we break through that level the market will either open below 880, not giving people the opportunity to get good prices to "sell" their positions OR the market will free fall through the market, as people panic out. This is not to say I am predicting this happens Monday. The market could trade around this area for another week, who knows.

But several facts support the thought the market is headed down again. First, insiders are selling stock at breakneck speeds. Translation, people IN the companies are dumping, why should I argue with them?
Second, the market trading volume has been getting lower as the market gets higher. Meaning as the market rises we have LESS buyers, not more. And as the market sells off, like it did Thursday, we have higher trading volumes. This indicates people are ready to dump in volume, but are not willing to bid up prices from here.

And lastly, the actions of the government, changing rules to obscure trading of Goldman Sachs, US bond forgeries exceeding 130 Billion being swept under the rug and those caught with them released, US States like California issuing IOU's instead of cash, because they are broke, and 100's of other news items.

The bulls argument? Second half of 2009 is a recovery, buy stocks while cheap. Numbers that are released such as unemployment are very bad, but not "as bad" as expected. Looking deeper those numbers are manipulated to look better. I suspect reality is much worse than the headline numbers.

My plan? Hold all shorts, hold all lottery tickets (including FAZ which may get very dangerous), and hold gold miners. However, I suspect the gold miners may break the bull trend line and go MUCH LOWER. I advise against buying more miners for a while.

CASH is once again the safest play. Even with all the world bitching at the US, the dollar is not collapsing next month in my opinion, but the market might.

If this next downfall takes us to DOW 4K, (BUT I doubt it, Obama short term tricks are just starting) at that point, my plan is to go all natural resource stocks and wait.
I posted this Sunday for Monday, I am on a business trip this week, will see how well I can keep up.

No comments:

Post a Comment