I guess those odds I spoke of with yesterdays post held true today. It’s going to be a long weekend for all the talking heads that trade stocks for a living. This was one of the ugliest day’s on the market that I can remember in a long time. Those monthly numbers are just one day! One day! Also look at the YTD columns, we are almost back to the beginning of the year and below for others. Glad I packed in my 9.4% gain in my pocket awhile back.
I will start working on opinion for the week and next week soon. Hope all me readers were safe through the month of May and are still safe today. I still believe there is risk for lower prices yet.
Remember early in the week I had pointed out in a 10 minute chart that we appeared to be consolidating and I wanted to wait and see which way this thing broke before I made any type of move. Well Friday we fell from the middle of that consolidation area, out the bottom, and then continued down all day long with no hint of a recovery. That is just all out ugly day. But once again I say, not one day does a trend make and a 10 minute chart is way to hard to trade.
This S&P 500 chart is complicated but let me try and walk you through it. Lower left is where a nice long uptrend started and then I marked the point where trouble started. Once this new trend starts there is tool called Fibonacci Retracement that will give you basic support and resistance levels that for some reason seem to represent points at which stock price will pause, reverse, or consolidate. You can see we bounced and rode along $1340 for about 4 days and then fell through. Support level 1 failed. Then we hit $1289 and immediately started back uphill creating a Bear Flag. This is normally a sideways consolidation most times with a upward trend and then the majority of the time, it breaks back down in the direction of original trend which was down. May 31st, which was Thursday that break down started. Friday June 1st it was confirmed and confirmed hard that we are not done going down. If your use the measured ruled for the Bear Flag, we could target $1167. We blew right through support number 2, $1289, so I see price heading toward $1248 before slowing again to test the Bulls. There is more, price is well below the 50 day moving average and the 50 day is falling. We now have a new lower pivot high that gives us a distinct red dotted down trend line that has to be broken before anything good can happen. Remember, this is all just on the daily chart. On the weekly chart it appears in the next two weeks we might do a downside crossover which could mean at least 6 to 8 weeks more downside pressure. There absolutely nothing to like here even if your bottom fishing and if you can give me a good reason to invest here, I would really like to hear it. Monday my plan is to re-short the market with my play money which means I’m betting it’s going down.
One more item to confirm to stay out. Click Here, see how far below 65 we are? We must be at or above 65 to feel confident that the market is in Bull market or the reverse holds true at or below 50. In between can sometime be wishy washy.
Ok with all that crap said above about not putting your money in the market, when do we? Do you have a plan? You should at least stack the deck in your favor. That doesn’t mean it will always be 100% right, because is that was true, then JP Morgan would not have just lost upwards of 4 Billion that we know of and rumors are starting to fly that it might be closer to 21 Billion. So let’s make some rules to follow.
1. CBL – Count back line. Just click it to get definition. Price must close above CBL
2. The red dotted down trend has to be broken.
3. Price closes above 50 day moving average.
Ok with the rules set above we have a plan of attack and or a starting place. It takes all the guess work out it and you do not have to babysit it or guess. We might have to adjust it lower, why? Because if the current trend continues down, the CBL and 50 day ma will move down with it. I can also show you that if CBL is met, then normally 2 and 3 will also fall into place for us. Believe me, this will at least give you a reason to be in instead of saying, “I think this is the bottom because CNBC said so or I have a hot tip or my cousin cousin is a broker and he or she see’s all.” What I want to do is show you is that there is place to start. You can see it yourself before the newsman, cousin, friend, and broker tells you. Your not blind and you can do this. All you have to do, at the close of each day, see where the closing price is at that moment. How much work is that?
Conclusion: Stay out of the C, S, and I without a doubt. The way I see it as of the close Friday, only a fool puts their money in these funds based on what we know. Not on what we think we know or what might happen. To all of those that are in the L-funds, if we have a down week next week, it is very possible all L-funds will be negative for the year. In my opinion, you should treat the L-fund exactly as I treat the C, S, and I and when things get ugly, as they have been since at least April 23rd when I bailed, run to G-fund only.
Good luck and be smart.
TSP Distribution: G-fund 100%
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