April 30th, 2012
in Gary's blogging
Is today's session a correction for further advances or is the top in a rounding process? I sure can't tell from today's action of sideways trading. We witnessed a mild decline at the start of today's session, giving back some of the gains seen on Friday but then nothing. I had expected a rally early this week before the bearer of bad news hits us by Friday but I have long since tired of predicting anything. The low volume for the last 4 months has a lot to do with the technical aspect of this crazy market making heads or tails of anything.
The economies of the Eurozone, China and the US are in critical focus for the first time in weeks. The release of conflicting figures on US personal income and spending today, Spain heading for, or already in, a recession and china reporting disturbing financial numbers as it cut its official forecast for 2012 economic growth to an eight-year low of 7.5 percent. Even the S&P rating agency is posting concerns of many European banks that may result in a downgrade.
One Black Swan and the market's decline will be over so quick you won't have time to pull your pants back up. A lot of sheeples are going to get fleeced, but wait, I'll explain how you can do a bit of self-preservation by explaining what is going on.
Many pundits are predicting, and have been for several months, that we are heading for a train wreck, but it hasn't happened. Others, like myself, have been opting for a mild summer and decline. Others still are looking at their tea-leaves and predicting further market highs. My opinion is that the latter is not considering the worsening World economies and believing the US won't suffer too when they tank. So the first thing is not to panic.
The next point of contention is the Euro news. It isn't good and will probably drive the markets down. I would be more into trading short ETF's that anything long. Any trades right now isn't a good idea as the risk/reward ratio is not in the traders best interests. Lay low for the time being.
The big Black Swan event that is in the back of my mind is a possible 'police action' with Iran. This is possibly the single largest reason I haven't done much trading this past 2 months. Here is what I think is the proper trading strategy is for the next few weeks and why.
The US has just moved its most intelligent and advanced war plane in the World, the F-22, into Saudi Arabia and it wasn't just for show. In some serious 'saber rattling', just this last week, they have flown these 6th generation weapons close to the Iranian boarder in a show of force.
As of today, there isn't any radar system, produced by any country, that can defeat these extremely sophisticated stealth war planes. With the expected, no comment from the Iranians, I am sure this has action not gone unnoticed and put them on notice. On the same hand I am not sure the Iranian's will back down in their nuclear aspiration either. For the 'war planners' another new moon is coming up in 2 weeks. Plan for it by looking for some short ETF's, these you can always get rid of. Shorting oil with SCO the minute it shoots to $200 would be a good move.
So if isn't a educated belief that the markets are about to show more weakness shortly or the threat of war isn't enough to have you sit on your hands for another couple of weeks, or so, I don't know what is. From a swing traders standpoint, this is a time to consolidate, if you haven't already done so, and at least prepare a list of shorts. There really isn't much more you can do except take risks that are not warranted at this time.
Stock Market Road Map For The Rest Of 2012 by Eric Parnell
“The stock market got off to a rousing start in 2012. But despite robust gains in the first quarter, stocks have recently shown signs of weakness. More significantly, substantial questions remain about the sustainability of these gains in the coming months.“
I read Mr. Davis' articles from time to time as he is one of the most prolific authors with a quick wit and incisive insight. My single criticism is that he lets slip in political 'incorrectness' that unfortunately paints him in a uncomplimentary corner and makes his articles seem less than accurate at times. Never the less, he has many interesting views in which I wholeheartedly agree.
Money, Power And Wall Street by Philip Davis
Frontline did this very good documentary and I'd file it under "those who forget the past are CONDEMNED to repeat it" - let's all TRY not to repeat the mistakes of 2008. "Wall Street got bailed out and Main Street didn't" is the quote that neatly sums up the present situation.
Despite a myriad of worrying data, the Corporate Media is in full-blown promotional mode - pushing stocks as if it were modern snake oil, the panacea that will cure all your ills.
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Written by Gary