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MARKET DIRECTION CALLS
August 2 2011 - Selling Intensifies
August 1 2011 - Bear Returns
July 28 2011 - Before The Open
July 27 2011 - Down But Are We Out?
July 20 2011 - Stock Market Volatility
July 18 2011 - Investors' Nervousness
July 15 2011 - Earnings VS Bleak Data
July 14 2011 - Below 1310
July 13 2011 - Ugly Looking Chart
July 12 2011 - Razor's Edge
July 8 2011 - Nasdaq Leads The Way
July 5 2011 - Expected Weakness
July 1 2011 - Overbought
Jun 28 2011 - July Rally?
Jun 27 2011 - Mixed Signals 
Jun 21 2011 - Bottom Or Bounce?
Jun 16 2011 - Raising Cash
Jun 15 2011 - More Downside To Come?
Jun 14 2011 - Bounce or Bottom?
Jun 12 2011 - Batten Down The Hatches
Jun 6 2011 - Bounce Sometime Soon?
Jun 2 2011 - Sell Signals and Warnings Everywhere
Jun 1 2011 - How Bad Could The Selling Get
Jun 1 2011 - Tread Carefully - Markets Remains Overvalued
May 31 2011 - Success - 100 Day Moving Average Tested
May 17 2011 - Be Careful Out There
Apri 18 2011 - Two Bears Compared
Apr 13 2011 - Why I Bought Puts Today
Apr 4 2011 - Breaking The February Highs
Mar 16 2011 - The Art Of Being Wrong
Mar 15 2011 - Market Remains Resilient
Mar 11 2011 - Trend Is Down
Feb 25 2011 - Trend Turning Bearish
Feb 11 2011 - Still Up - But Watch For June
Jan 3 2011 - Trend Remains Positive
 

MARKET DIRECTION CALL S&P 500

June 27 2011 - Mixed Signals - Down Trend Continues

Did today seem like a decent rally? Looking at the S&P 500 for today, I think this bounce still remains suspect. The market pushed up but on still thin volume, but from around 2:30 PM until the close there was a lot more selling than buying and the S&P closed on selling.

S&P 500 chart - Jun 27 2011

In the late afternoon when the selling commenced, I purchased some SPY puts. Look at the chart below. This is why analysts are having so much trouble deciding what direction the market is going to take. It's due to the mixed signals. Some point to the market moving higher and others lower. Here is my best guess based on the table below. I will look at each section of the image below and give my opinion. 1) The Trend is lower until the market can break through the May 30 high and begin to recover. If this can happen, I do not believe it will be any time soon.

2) Today's volume was very poor which definitely makes the rally suspect. 3) The Ultimate Oscillator has been climbing each of the last few sessions and continued to not only stay positive but moved up again today. However the Ultimate Oscillator has been wrong many times before and while it points to a market that could move higher, I really have doubts. 4) The Slow Stochastic has given two bear flags over the last few sessions. Look how even with the last few days, while the ultimate oscillator continues positive, the slow stochastic remains solid bearish. 5) MACD for the past few sessions, just like the ultimate oscillator is rising, indicating the market will rise higher.

S&P500 Stock Chart - April to June 2011

However markets can really fool investors. Below is the stock chart from January 2008 to April 19 2008. Basically the S&P didn't go anywhere, but the constant sideways movement had to break one way or the other. We all know what happened when the break came, the market collapsed. The below chart shows how long a market can last going sideways. But in most instances a sideways market will break to the downside. It is only natural for this to occur since, if a market cannot recover to new highs, and continually keeps testing support, it will eventually break support and move lower.

S&P500 Stock Chart - Jan to April 2008

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SUMMARY

It is obvious after looking at the charts above, why analysts are perplexed by the market. There are mixed signals every day. Despite the mixed signals, often the path of least resistance is the one followed when a market is having trouble. In this case I believe the trend remains down. If the downtrend continues, there is always the chance it will fall further and faster than most expect. For this reason I again bought puts today. I will continue to buy and sell puts until the market can break back above the May high and begin to again challenge the April and Feb highs. There are a lot of headwinds for this market and investor fear is definitely one of them. I believe it is foolish not to have some insurance as QE2 comes to an end and the Greek crisis keeps investors on edge.

 

Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
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