Week ending 5/21/10

While I was on vacation I was able to stay away from news and just follow my technical's and this was very relaxing. No one can predict the future of the stock market and if that was possible then we or that special person would be a millionaire. But what you can see is when people are exiting out the door or coming in to buy. Right now two out of three indexes that I follow because of my retirement account and my personal investments are showing signs that people are exiting the building. One they are leaving out all doors.

The S&P 500, C-fund, or SPY they are all the same to me, things are looking very cautious at the moment. It is in the beginning stages of building a down trend but still to early to call. Look at the weekly chart which smoothes out all the noise of the daily, and you will see that the weekly trading bar is still above the 50 week MA even though it did trade sometime below it. The closing price Friday is right on the 50 week MA. The RSI is below 50, which is not good, but it by itself is no signal. It needs to be confirm by 50 Week MA and price. Price is always GOD. What we do not want to happen is for the SPY to fall through the first major Pivot Point which is considered support. I drew this support point on the chart. So my position is to not buy any new long positions and still look to short any new stocks that are setup in a down trend or fallen out of favor.

The Small Cap, S-Fund, or $DCWPF is setting up also for a down trend, but unlike the S&P, it is stronger and to far away to make the call. It concerns me that it broke through my resistant line, but she is above the 50 week MA and the RSI is still above 50. We are in better shape here but it must still be monitored.

The European, I-Fund, or EFA is in a full fledge down trend looking for a support point to bounce off of. It has blown through Resistance, 50 Week MA, RSI below 50, and it is heading toward the next major Pivot Point for support. The index and the stocks in it are candidates to short and it is not where you want to put any short term money, if your looking to make a profit.

Currently I have been cashed out of every long position in my Trading account using trailing stops, except for the August 37 Puts that I have on GILD. In my retirement account, I still have money invested in the C and S, but have been out of the I-fund since January.

I read some advice that was given this week and I had to laugh because in the past that was me. “best advice I can give on a market day like this...like what you own and hang on. Do not get out of the market.” I have to disagree with this basic philosophy because you will ride your profits and position(s) into the dark hole of despair. I have seen it, I have lived, and now I have to clarify this statement. “Best advice I can give on a market day like this, is like what you own and protect yourself with TRAILING STOPS!” All stocks eventually fall out of favor and you are not big enough to influence price. So follow price and do not predict price.

Remember follow the money and use trailing stops to protect yourself.