Oversold Markets and Starting to Fall: Cash is King.

March 6th, 2012
in Gary's blogging, Special Post


10:00 I hope you have some cash stashed away because the time has come and don't say you haven't been warned. Look this market isn't going anywhere, face it, if it were to reach for higher levels it would have done so last month, or maybe the month before that. Even the last 2 weeks would have been fine, but that isn't the case for many reasons to many to list here.

Now you have to wait for the bottom which is a hotly contested point; where is it? What's the magic number going to be. For the SP500 it appears the first step is 1344 and that is a wait and see if we go below that and the next is 1286.

The bulls say that the 1344 area will be the bottom of the correction and will rise again. The bears claim the 1344 will not hold and the correction will continue.

Follow up:

View From The Turret: Climbing The Wall Of Worry by Mercenary Trader

In today’s environment, skeptical traders are finding plenty of reasons to doubt the current rally:

  • Europe’s never-ending debt crisis

  • Disparity between affluent and baseline consumers

  • Spiking oil prices which constrain growth

  • Disappointing Q1 earnings announcements.



David Stockman wrote this piece

When The Real Margin Call Arrives, The Carnage Will Be Unimaginable’

Wow. Talk about calling it like it is.
The Associated Press is out with a report (via Business Insider), ”David Stockman: You’d Be A Fool To Hold Anything But Cash Now,” featuring a no-holds-barred interview with an individual (and former White House budget director under Ronald Reagan) who is no stranger to the pages of Financial Armageddon.
Here is a brief excerpt:
Q: Why are you so down on the U.S. economy?
A: It’s become super-saturated with debt.
Typically …

[visit site to read more]



Being oversold isn't always the precipice that awaits a market fall, but it sure seems like that happened today.

Since late January, 2012 the signs of being an oversold market have been in play and have not been alleviated. Saying that equities have had an impressive run is an overstatement.

Oversold Market Means Underweight Risk

“Equities have had an impressive run, opening the new year of 2012. The rate of change has drastically increased, sending oscillators into oversold territories. Yet, a trend has developed alongside the equity run up, which shows less correlation between European news and US equity markets. The fallacy would be to take this as a sign that Euro issues are now less capable of producing a large downward swing. In fact, Euro issues could potentially be the catalyst that drives the oversold market for a sizable pullback.”

Jim Farrish makes a case for overcoming emotions of the masses around us.

Investors Are Watching And Waiting For Next Opportunity by Jim Farrish

"The market remains a constant mix of worry and optimism. This has made for a topping formation in some sectors while others continue to march higher. We could rant about Europe, Washington and the endless debt parade, slower earnings, and an economy that is growing at a benign 2% GDP, but, would it change anything? Would we change our portfolio or just become more cynical about the markets and the world in general?"


The challenge for you and I as investors is the ability to overcome our emotions when everyone around us is living them in full color.

To watch this daily, just turn on CNBC (the Confused Neurotic Broadcast Company). The ramblings about what's hot and what's not are enough to make you scream. Bottom line, the markets are marking time to determine the next directional move."

Time to take profits like the big-boys are doing serendipitously and hold on to your cash. You have been warned as Bret Jensen makes his case.

Forget May; March Is A Good Time To Sell And Go Away by Bret Jensen

“Among the biggest lies in the human language are (A)"I am from the government and I am here to help you", (B)"I will respect you in the morning" and (C) "It's different this time". It is last one I would like to explore in this article. During the first half of 2011, the market rallied on hopes of better job growth and accelerating economic activity. Those hopes carried the market forward until the Greek debt situation and disappointing economic growth caused the market to have a significant selloff in the summer. The market managed to rally late in the year to get the market back to basically even for 2011. “



Cash is king. I hope you have some because there are going to be some good pickings. Hold your breath and see what is going to happen in the next few days.

Written by Gary

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