Thursday, May 10, 2012

Weakness in this market, but it’s not too dramatic … or is it?

HUGE WALL OF TEXT COMING UP, great insight though.


The United States economy is definitely starting to consolidate, there’s no doubt about it. How long will it last? Only time will tell.

Take a look at this SPY chart. As I mentioned before, the market wants to rest, so now we’re consolidating. An important zone is the $134 support area – give or take one or two points. Holding it will be key; breaking it on strong volume will result in turmoil. In addition, most indices ARE below the 50 DMA, thus, treading the bearish waters will require greater care. I would not suggest going long on anything until the market stabilizes again.
Recent events have also given me a slight suspicion of the downside. The general intake from the daily headlines has been trouble. We have China posting lower data, Greece on the verge of getting shunned from the Euro yet again, and Spain creating more fear in the Eurozone with their overlooked risk.

That’s why we have the VIX heading higher – investors are simply scared.

Without question, our fear index will test the 50 DMA. Breaking through it on high volume can create huge volatility. It already broke through the descending trendline, not good.

Furthermore, JPM released some horrible news after the close, and being a significant company in the financial industry, its 5% dip will definitely create some short-term selloffs. Probably a gap down tomorrow.

Finally, we have many companies with tremendous runs in the last few months dipping as well. AAPL is a good example, let’s talk about AAPL.


I’m sensing a gap down in the morning. I’m still short on this stock and I have been adding to my short hoard on each bounce. This stock is just not holding up at all.

Even a dead cat bounces from a big drop. Why is it a dead bounce? No volume at all. This stock wants to break that 554/555 support band very desperately.

I’m still having a negative outlook on this broken stock in the short-term. The fundamentals are still solid, so if it ever drops to 520ish, I will be looking to step in on the long side. But for now, I am short on AAPL.


Still holding this one short. Fundamentals suck, technicals suck. Will ride until my target of 61-63.

Hope you enjoyed!

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