Didn't spend much time watching the markets today, settling instead for an informal lunch, matchmaking a friend from overseas with my father... but that is hardly why you read this site, so here is
today's news.
It has been another bad day for the longs, with some extra face stomping, as the SPY gently broke through last weeks support. China (
FXI,
GXC), which I hoped to be making a bullish pennant, broke to a new low in its 4 month consolidation range, increasing the likelihood of some more selling pressure, though I wouldn't say the bullish case is over quite yet.
GXC/
FXI are an excellent example of why it is safer to wait for a pattern to confirm itself, before jumping in early with the expectation of some extra points.
Inverse Real Estate, Financials, Consumer Discretionary and Small Cap Value (SRS,
SKF,
SCC,
SJH) had a great day, and surprisingly, agricultural commodities held up rather well (
DBA). The Yen and Swiss Franc show excellent strength, and the Yen actually broke its 1 year high (
FXY). Disappointingly,
GLD was down a hefty 1.7%, but considering its remarkably fast run in the last two weeks, I would say some consolidation is to be expected.
GDX took a market under performing hit, with at +3% loss that outta shake out some of the weak hands, as this too has had a rather dramatic rise over the last 3 weeks.
Newmont Mining (
NEM), though down on the day, was quite strong, as was
Humana (HUM), both of which I expect to outperform in the coming months. I'm sad to see I was stopped out of
BPT... I hope to reenter the position on strength, though the short term technical picture isn't all that great.
The horrific numbers from
Citigroup come as no surprise, but the negative retail numbers are certainly worrisome for those expecting to find value in the retail sector. Thus I remain short consumer discretionary, financial and real estate sectors, with an expectation for precious metals and defensive stocks in general to outperform.
Fundamentally: The markets are beginning to see information indicating a spillover of economic malaise into otherwise untouchable sectors (the American consumer), and this will continue to weigh stocks down until lower interest rates buoy the economy. This will only increase the value of commodities, especially as Asian consumption rises.
Technically: The market seems far from oversold, and thus any trades to the long side seem extra risky... That said, be prepared for anything as the overall volatility continues to rise (as seen on the
VIX) and the shorts get ahead of themselves, leading to the inevitable dead cat bounce squeeze.
Sentimentally: Investors should be starting to panic and traders will be able to take advantage of their misery.
Recommendations: Keep the portfolio market neutral, shorting under performance and buying out performance in the aforementioned sectors, always with a nice tight trailing stop to avoid any nasty surprises.
Apple continues to enjoy a short term uptrend, but I think there are better places to feed.
General Motors still looks terrible, but it too is enjoying a short term uptrend.
Google might break the downtrend, but it's at major resistance.
POT is dangerous, and should be avoided (unless you like groovy tunes and the munchies).
I've said it before an I'll say it again. I'm not catching this falling knife, but I bet she'll see 300 again.
