Javascript DHTML Drop Down Menu Powered by Drop Down Menu
FullyInformed.com - Options and Stock Strategies For Income

 SignUp For Updates

  You are here:


Bookmark and Share

 

 

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 1 2011 - Tread Carefully - Market Remains Overvalued

As I mentioned in yesterday's market direction call any negative news will pull the market down. The housing news alone is enough to bother the market but the rise in the US Dollar also hurt equities today, let alone unemployment news and Manufacturing numbers.

The economic news today was enough to pull the market back. The see sawing back and forth is bringing volatility higher which is a great thing for those of us who do options, but it can be a little unnerving for those who are buy and hold stock investors or dividend investors watching their stocks thrash about.

 

Yesterday the US dollar moved lower and equities moved higher. Today exactly the reverse has happened and equities have sold off. Today the news of only 38,000 workers being hired for the month of May (which still has to be verified by the way) worried the market. Honestly though let's stop for just a moment and think about it. Apple is selling their ipads like crazy yet they are made in China. Iphone - China. Most auto parts - China. The US really needs a bit of a wakeup call.

 

Then auto sells from Ford and GM came out weaker than expected, well no kidding. How many people need to keep buying new cars every year? People need to be working to spend and right now many who are working are trying to pay down debt.

 

Then the drop of the US Manufacturing sector to 53.5% which is the biggest drop in month month since 1984, shows just how precarious the economy is. How many economists said the Japanese Earthquake-Tsunami wouldn't have any impact? Most. Wrong again. We are just now seeing that impact.

 

Now all we need is for Greece to announce, "OK, we are going to restructure our debt" - meaning default time. Now that will really bring the stock market down.

 

The economic problems are not going to go away for years if not decades. Those who want a market that just keeps climbing are living in a dream. There are going to be tough days ahead both up and down. This is why I believe in options over buy and hold or even dividend investing.

 

Remember, many stocks in this market are over valued by every stretch. As I said in my article on the cautious bull, the easy profits in this bull market have been made. Keep some cash around. The market also is watching the ending of QE2 to see what effect that may have or whether QE3 is announced. Stay tuned for that.

 

Don't forget that the Federal Reserve through its very actions is kicking the problems down the road. The hope is to buy some time for the economy to recover and for bankers and politicians to get their act together. But with 2012 an election year in the US, the chance of any real change is limited at best.

 

The chart below shows today's action up to 1:30 PM. Yesterday a nice rally, lower US dollar, today a nice selloff, higher US dollar. Noise is driving the market. Remember that fear and fear alone drives equities. Fear of missing a rally and fear of being caught in a downturn. This is the same fear that as an option seller I am trading against. This bull market is not over yet but nothing goes up in a straight line. It never is a comfortable ride after the easy money is made in a stock market recovery. Below is the chart for today June 1. The story from yesterday was that I should have listened to MACD that indicated at -0.93 that yesterday's rally was suspect and not confirmed. Meanwhile even with the selling today, the Ultimate Oscillator at 1:30 PM is still neutral with a slight bearish bias whereas yesterday is was neutral with what I took to be a slight bullish bias, which in hindsight was not the case as it was not above 50.0.

 

Keep some cash ready and remember that this market is over valued and so are many of the stocks in it, particularly defensive stocks. I sell put options so I can pick strike prices that I think stocks are fairly valued at. I am not seeing any market crash at this stage, but I remain picking naked puts to sell at prices where I will hold stocks. Tread carefully - this market remains overvalued.  


 

 

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.
By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not use this site. The author of fullyinformed.com assumes no liability for topics and ideas discussed, errors and omissions, ads and their content and external links. Any corporate insignia used are registered trademarks of their respective company or corporation and are being used for identification purposes only. All material copyrighted by FullyInformed.com. Reproduction in whole or in part prohibited. Copyright 2008

 |  site map  |  privacy policy  |  contact me  |  subscribe  |  exchange links  |  the author of fullyinformed  |