Stocks cross the red line
Worries over a Greek exit from the eurozone, Spanish banking woes and signs of a new global slowdown push the market through key support levels.
We'd all like to believe the fairy tale that the stock market is a sober, efficient arena where investors and capitalists meet to swap cash at prices determined by things like earnings, dividends and interest rates. Of course, it doesn't work that way. Prices tend to fluctuate around some abstract concept of "fair value" based on things like fear, greed, the strength of the dollar and, according to some people, even the phases of the moon.
Thus the popularity of things like chart watching among Wall Street practitioners, even if it's pooh-poohed by academics. It works because everyone else is using it. On Monday, technical analysts had plenty to look at as stocks crashed through key technical support levels, putting a massive head-and-shoulders reversal pattern into play while setting the stage for a drop to levels not seen since December.
Monday there was more evidence of trouble. European industrial production dropped unexpectedly in March as output in Greece, Italy, Portugal and Spain dropped sharply (by 5.7% year over year or more). In Greece, hopes of a pro-bailout unity government are failing, setting the stage for big gains by the anti-bailout radical left Syriza in a second round of voting next month.
That's the context for the big breakdown that's under way.
The Dow Jones, the S&P 500, the Russell 2000, the NYSE Composite and the DB Commodities Index (DBC) have all fallen through key multi-month support levels. Crude oil is plunging back toward levels last seen in October. The CBOE Volatility Index ($VIX) has jumped to levels not seen since February.
Emerging-market stocks in the iShares Emerging Markets (EEM) have fallen to levels not seen since January. Stocks in the Materials SPDR (XLB) have lost their 200-day moving average. Energy stocks in the Energy SPDR (XLE) have returned to their December lows. Even defensive stocks are being punished, with the Consumer Staples SPDR (XLP), which includes stocks like Kraft (KFT) and Wal-Mart (WMT), has moved below its 50-day moving average for the first time since November.
By all indications, the market sell-off has entered its most dramatic, most precipitous phase. If you're a conservative investor, look at increasing your allocation to cash or Treasury bills and bonds. If you're a nimble trader, there are plenty of opportunities to profit on the short side.
For the past two weeks, I've been expanding the short exposure of my Edge Letter Sample Portfolio with positions against materials, semiconductors, energy and financial issues. Highlights include a 14% gain in Citigroup (C) short, a 13% gain in the Direxion 3x Semiconductor Bear (TZA) and a 12% gain in steelmaker Gerdau USA (GGB) short.
With Europe far from fixed, a new recession threatening and investor sentiment damaged by the loss of technical support levels, these positions should continue to chalk up gains for the next week or two before I'll be looking to book profits.
Check out Anthony's investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up. Contact Anthony at email@example.com and follow him on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
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So again, wasn't it Ben and the Fed that bought all those Euro's with our tax dollars? Shame on the Fed again!
I am always amazed that there are so many economic smart people that think they know what is best for our country.
Remember: November 06, 2012
Boot all elected officials from office...we need new blood, even if they are not brilliant, common sense will do just fine!
Wall Street does not live in the real world and I think the world is catching up with it .
I really feel heart broken for those who have more money than they know what to do with.
I live in the real world where money is hard to come by.
The Fed is the pawn of the global banking consortium. The were charged with:
1) separating the American middle class from the equity in their homes. (check)
2) devaluing the US dollar every chance they get (check)
3) separating the American middle clase from the wealth the had obatin in the form of their 401K's and IRA's (check)
4) creating the banking crisis so they could validate that the US government was bent over a barrel and would do anything to keep one of it's big banks from failing ( Goldman Sachs was the sacrificial lamb but you can bet no other bank will be allowed to fail). This allows them to take ever increasing risks to line their greedy little pockets while providing zero to spur real growth.
It's interesting that when the market drops and the 99% lose money, "The market is making a correction," but when the 1% lose money it's the "Great Recession."
Their greed is coming full circle and is about to start biting them in the keester. To big to fail? To big to exist! As the Queen of Hearts said, "Chop off their heads."
You cannot pin the cause of it on one person. It takes a fool to follow a fool. Of course I am not calling out the fools. They know who they are even if they are in denial publically. I of course being of sound mind and body will stand on my assets and not part until hell freezes over. A bird in the hand is worth two in the bush any day . People should have held on to their values "teachings from older days" instead of believing that some upstart child had a great idea to use an exploit to make money. It is one thing to use market saavy to turn a profit on commodities based on the occurances known . It is another thing to feed on others by luring them in claiming you will manage their money and losing money for them but making money for yourself. Yeah I know it takes two to tango. Back to my lemming statement in sentence 2...... My uncle was a broker and I watched exactly what it does. Worthless BS. created by trust and turned into someone I wouldnt trust with my garbage. Not just the brokers but outside affects like organized crime and more. In a world with so many people due to a lax of rules and standards once again history is repeating itself by allowing criminal activity to make its way in under the ideals that it is new and innovative ideas.
Let me ask everyone a question. Who thought it was ok to twist the moral ethical truth into something profitable at the expense of their reputation ? This seems to be a normal acceptable activity now days but it will pass . People who fall into the trap will fund the recovery of the ones who knew how to hold their ground and not compromise their principals. I said it before and I will say it again even though it stays plastered all over the media as acceptable . Gambling is an addiction disease. Anyone who thinks it is ok to lie , decieve, coherce immorally and unethically and then blame a person's trust that was supposed to be held high as a weakness they had which was used as a tool to gain and throw them under the bus is the problem. Then in order to gain support knowing what they did was wrong they rally their friends and attack the trusting person if they question the morals accusing them of being butthurt for losing.
You all want to know what is wrong with the world ? Entrusting of power into the arms of a poorly raised child. Look at the People profiting right in the worlds face and then simply retiring to that island where there is no bad weather and no one can get to them. No I was not really amused by condescendning statements made by some of the 1percenters. they are nothing but wusses if they have to leech and then make comments on how someone makes too much even if they are another leech like the media . We were entrusted to not allow media to dictate and that is what has happened except some of the media who still holds the morals high. yes you know who you are . Just because they report something with drama and flair doesn't mean it is the whole story. They lost that ability many years ago when they too put these same crappy excuses for people in charge except again for some who are doing their jobs. I like reading the truth because it makes me feel informed.
And if you rotate counterclockwise on your left foot with Pisces ascendant it clearly shows we're all doomed. Ack! The Great Correction approaches!
As for me, I've already rebalanced in May and gone away...
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