Traders Corner   32 comments

bear

The bears might have taken a nap yesterday, but don’t expect it to last. I will go out on a limb and say we are seeing the start of a cyclical bear market. I say this based on the first rule of investing: “Don’t fight the Fed.” With the Fed tapering QE, that means less liquidity flowing into markets. We have already seen the reaction from emerging markets, and it is only a matter of time before that impact reaches American shores.

I will also predict when this cyclical bear market will end: This summer, roughly between June and August. It will happen as soon as the U.S. economy starts to show weakness in response to the QE tapering. Whether it is a little weakness, or the economy comes to a screeching halt, remains to be seen. But I expect the Fed will reverse course, and the markets will react appropriately.

My macro strategy for this:

1. As far as the long-term holdings in my 401k, I plan no changes. They are all dividend stocks (except Google, which I plan to hold anyway), so I have no reason to sell them.
2. For my shorter-term IRA, I plan to liquidate most of it, with the exception of my biotech stocks, GWPH and NNVC. While biotech can be impacted by a bear market, they also tend to be more responsive to company-specific news, even on down market days. Selling now would defeat the purpose of owning a biotech stock in the first place.

As for today, S&P 500 futures are down right now, so it looks like the bears will open the market today. With the technicals looking neutral, don’t be surprised by a down day.

The S&P 500 levels to watch today:

UPSIDE: 1795 (January 27th’s high), 1798 (January 30th’s high), 1812 (50 day moving average), 1815 (January 13th’s low), 1820-1821 (2 data points), 1823 (January 6th’s low), 1824 (20 day moving average), 1826-1832 (8 data points), 1835 (January 17th’s low), 1837-1840 (7 data points), 1843-1847 (7 data points), 1849-1850 (January 21st’s high, December’s high and the all-time high), and 1870 (top of the Bollinger Bands).
LAST CLOSE: 1794.
DOWNSIDE: 1793 (January 28th’s high), 1790 (2 data points), 1779 (January 28th’s low), 1778 (bottom of the Bollinger Bands), 1777 (January 30th’s low), 1775 (October’s high), 1772 (January 27th’s low), 1770 (January 29th’s low), 1767 (December’s low), 1746 (November’s low), 1729 (September’s high), 1709 (August’s high), and 1705 (200 day moving average).

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32 responses to “Traders Corner

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  1. Today I am happy I have not yet sold my TWM hedge. Looks like an ugly day.

  2. I wouldn’t be too quick to jump on the downside. The 100 day ma on the S&P held yesterday and we don’t know where we will end up today. If we finish down big today with little or no bounce on Monday then we can start looking to the dark side. I’ll be watching for 1730.

  3. PRAN at 11.28

    • Out at 11.90 plus 62 5.5%

    • Nice one trader!

    • Hell, I didn’t know his reflexes were quick enough anymore to be able to hit the buy and then the sell button within12 minutes of each other. 🙂

      • Oh how I look forward to your comments. Almost don’t want to post anymore. 🙂 Thanks to the rest of you. For those of you who are interested in these short term trades here’s something to look for. In addition to using technical indicators I watch for patterns. Take a look at a 10 minute chart of PRAN starting 1-16. Look at the opening price and the high for the day. Since it started to move on the 16th it has been higher than the opening price every day. Usually an early morning move. I set a number I’m looking for (don’t be greedy) and then will usually sell if I hit that number. PRAN has continued higher but it doesn’t matter to me. I banked a nice profit and will be around to play again. Always have to keep in mind it could have gone the other way. These daytrades don’t have to be as high risk as most think.

  4. Trader – what do your five minutes charts say about TWM? (I am serious!)

    • Marshall, 15 minute chart is more important here. At the moment looks good. Having said that it can change in a hurry. What I am watching is the 100 day ma. Look at a 12 month daily chart of the SPY and IWM. You’ll see that the 100 day has been strong support over the last 12 months. Even with the drop today we are still sitting on the 100 day. The next few days should give us some clue if this is the bottom. If we break the 100 day and fail to move back with in a few days, my guess is lower. I know you are nervous with this play. My suggestion is take your profit here and wait until next week. If we break the 100 and fail to move back above that level you will have plenty of opportunity to enter again.

  5. Sold the balance of ANGI at 17.95 for plus 1.30 7.8%. I don’t want to risk losing these nice short term profits. I’ll take a look next week and see how it looks. ANGI has been very good to me. May have to send her some flowers. 🙂

  6. With the sale of my TWM, I have bought my newest tranche of magic Formula investing stocks. For those of you who have not heard of MFI, it is based upon a book by Joel Greenblatt (the little book that beats the stock market). Every quarter I pick five stocks that meet the criteria of the book and I hold them for a year. Since I began this approach in August 2012, I am up 50.2%, which is beating the benchmark by 24 points. The February 2013 tranche was my best ever, up 77.5% (AAPL, GA, STRZA, CA and NUS). I will sell those five stocks on Monday to make sure I am treating as long term capital gains. My five new stocks are ATVI, GPS, RPXC, SNDK and WNR.

  7. Fellow GTAT owners – I saw where MS announced today a passive 5.3% stake in the company. Stock is up 30 cents to 10.38.

  8. Tom – glad you picked up on my reference! Those guys act like buffoons, but they are both MIT grads.

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