It's do-or-die time for the market

As stocks hit resistance from their 2012 highs, investors should be looking for additional upside progress.

By Anthony Mirhaydari Aug 21, 2012 4:38PM

While many people couldn't care less about the stock market right now as end-of-summer vacations are in full swing, there were some real fireworks to be seen Tuesday. Apple (AAPL) soaring and then crashing. Facebook (FB) collapsing. The dollar plunging. The major averages pushing over their 2012 highs early in the session before being smacked down into negative territory. And all the while, with everyone distracted, precious metals continued to launch out of a long multiyear downtrend.

 

With the S&P 500 perched right below its 2012 closing high, the bulls are at a decision point: Either they push over the bears' defensives at 1,420 on better economic data, signs the Germans and the Spanish are opening up to the idea of a bailout in exchange for reducing Spanish borrowing costs, and hopes of aggressive central bank intervention -- or they succumb to the market's short-term overbought condition.

 

 

I think investors should be looking for additional upside progress for three big reasons.
For one, precious metals are rallying on a combination of higher inflation expectations as well as weakness in the U.S. dollar. Both are positives for the "risk on" complex of stocks, commodities, and yes, precious metals.

 

Also, cyclical, economically sensitive stocks continue to power higher on a scale not seen since January. You can see this in the way financial, retail, materials, energy, and tech stocks are leading the charge while investors largely ignore consumer staples, health care, and utility stocks. That's a sign people are trying to get more exposure or "beta" to the market; and they aren't really worried about a retrenchment in overall economic growth.

 

And finally, on a purely technical basis, the S&P 500's directional indicator -- which was created by Welles Wilder in 1978 -- has moved into solid uptrend mode for the first time since January. Before that, uptrend modes were triggered in early and late 2010 and in the middle of 2009. All were associated with smooth, steady low-risk rallies.

 

I continue to recommend my readers and newsletter subscribers focus on precious metals and related mining stocks until the bulls resolve the impasse to the upside. Examples include the Velocity Shares 3x Silver (USLV), up nearly 30% since I added it in late July, and First Majestic Silver (AG), up nearly 18%.

 

In the Edge Letter Sample Portfolio, I'm booking profits of nearly 10% in Apple and Market Vectors Oil Services (OIH).

 

Disclosure: Anthony has recommended USLV and AG to his newsletter subscribers.

 

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 anthony@edgeletter.c​​om and follow him on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.

34Comments
Aug 21, 2012 8:42PM
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Anthony... Just last Thursday your article stated "Epic Stock rally under way".

 

Now only 3 Stock Market days later..."it's Now Do or Die for the Market"

 

Your losing creditability writing such flip flopping stories.

MSN money should start proof reading what you write, because it's an absolute embarrassment to their organization.

Aug 21, 2012 9:10PM
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Anthony, I enjoy your commentaries and have been generally following your logic with some buys but Ricky's comment has some validity. Just last week, you seemed to feel that the market was preparing for an epic advance...very bullish language. Now, a week later, you seem to be unsure about the epic prediction and now it seems that you are saying it is a 50-50 proposition. Please explain so I better understand your logic as I wish to feel comfortable with your opinions now and in the future. 

 

Regards, Rich

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RIcky,

 

What market short are you talking about? My positions are all longs.

 

Anthony

Aug 21, 2012 11:18PM
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@Active RIA ...Did you even bother to read Anthony's article he posted last Thursday?

 

He didn't mention anything about being nimble or flexible in these trying times......He said a "EPIC STOCK RALLY IS UNDER WAY".

 

You need to quit posting things he DIDN'T say because it's making you look absurdly foolish.

Aug 22, 2012 2:05AM
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The economy is struggling and that will not change until policy is changed regarding trade and U.S worker compensation.  A capitalist, consumer based society only works well when people have money, not just the wealthy.  A society is an ecosystem supported from the bottom up, not top down.
Aug 21, 2012 7:59PM
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I have followed Anthony for about a year and a half now.  He is a good writer and can convince you of his point in a very logical way.  The only problem is when he's saying the market will go up, it usually goes down and vice versa.  I now use him religiously to do the opposite of what's he's saying.  In the beginning I did lose money on his advice but now I look to what he's saying to do the opposite.  As for buying stocks, wait and be patient and you'll save yourself a lot of money.  Remember, buy low and sell high?  Most people don't!
Aug 22, 2012 9:11AM
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Germany has made it clear they would accept some easing of the budget goals for the heavily indebted countries, such as Greece, but no debt sharing without conditional targets. The idea that they would allow the ECB to embark on unlimited bond buying is just absurd. Won´t happen.
Aug 22, 2012 2:26AM
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Please be clear everyone that when anyone talks about bulls and bears and which way they will make the market move they are talking about a small number of High Frequency Traders, Hedge Funds and Option Traders that make at least 75% of all trades each day and who are the major determinants of the short and mid-term market movements to the detriment of others in the market.  They decide which way the markets will move in the short and mid-term and then try to rake profits from the market movements they themselves have created.  Do not make the mistake of thinking that the short and mid-term market movements have much if anything to do with the effect of the trading done by  non-professional traders in the market.  It is all orchestrated by a relatively small number of professional traders.


Aug 21, 2012 7:57PM
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Take a look at a 30 year chart of the  Nikkei, in 20 years, that's what a chart of the S&P 500 will look like !
Aug 22, 2012 7:33AM
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Just for the sake of giggles,lets give 2 trillion to the wars and 1 trillion to homeland security that still leaves an extra 7 trillion dollars more during the Bush tax cuts years to spend.Where did it all go?
Aug 22, 2012 8:47AM
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I suppose there are still a few who still can't accept the New World Order and world economy is the goal of our congress and president.  My Question is this.  Is our demise and the destruction of our middle class the proper way to go for the quality of life in America and the World? Is getting America up and running not the benefit to those throughout the world?  Just doesn't make sense to dumb down America and think it will be a benefit to the rest of the world.  A capitalist framework; and I don't meant the corrupt crony capitalism we see in America today, generally raises all boats while socialism lowers all boats.  I think a socialistic approach dumbs down the system.  The hard question I see is rooting out the corruption in our present relationship with congress and the international elites working in lock step. To actually return to a more perfect form of regulated Capitalism world be more of a benefit to the rest of the world than cutting our form off at the knees.  I read an article just recently about a young woman developing a program to better analyze and evaluate breast cancer in women.  Has America not devised the best and most innovative approaches to medical care in the world?  Socialism in my opinion would act as a drag on innovation and merely prolong and benefit the current rich and political system we have in the world now. I just can't buy into the apologetic response to the rest of the world for America we are seeing now.
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I think the standoff will be resolved to the upside
Aug 21, 2012 5:35PM
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Oh come on Anthony...just last week you wrote a article proclaiming we are on the "verge of an EPIC market rally".

What did you do..Go all in on a market short! Your no different then the rest of the market manipulators!

Aug 21, 2012 9:33PM
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"Either they push over the bears' defensives at 1,420 on better economic data....."

 

Existing home sales data due tomorrow seems to me to have  slightly conservative predictions.  Same thing with jobless claims for Thursday. However, friday's durable goods report scares me.  It's always volatile and a 3-month streak of +% data would be unprecedented in 4 four years. 

 

"..... or they succumb to the market's short-term overbought condition."

 

I don't think it's overbought until S&P breaks 1450.  (at roughly PE=>16), which would give similar PE's to the period between 6/2010 and 6/2011, which suspect I is the "new era" average.

Aug 22, 2012 7:29AM
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Total tax receipts from tax years 2000 to 2011 were 25.753 TRILLION(lower tax rates)--total tax receipts from 1988 to 1999 were 15.421 Trillion(higher tax rates).  WHY?

Aug 21, 2012 10:30PM
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good analysis anthony - the market shifts quickly and even though the volatility has slowed dramatically we now have low volume, tight trading ranges and the impossibility of going completely bullish or bearish long-term due to the varied technical, fundamental and geo-political ebbs, flows and vortexes.  one must remain flexible and nimble in these trying times and yours is solid food for thought (although some posters impossibly want you to be prescient and omnipotent concurrently).

 

i do have one question: why not share a few of your losing positions every once in a while to let us know you are indeed human.  keep up the nice data flow mr. prolific!

Aug 21, 2012 10:20PM
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If you log on to these dating service sites, they hook you up with an investment advisor for your exciting date.  You have to pay them a commission.  Then, you go out to dinner.  Then, they recommend you buy:

 

Exxon

Proctor & Gamble

Johnson & Johnson

McDonalds

Coke

Conocco Philips

Royal Dutch Shell

Apple

Microsoft

Ford

 

There.  I gave you that advice for free.  So . . . buy me a drink.  We're on a date!

 

 

Aug 22, 2012 1:06AM
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I follow Anthony simply for his entertainment value.  He clearly has no idea what he is talking about, changing his recommendations as the winds turn.  It is unbelievable that someone may be paying him for his commentary!
Aug 22, 2012 7:26AM
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Anthony;   I'm still looking for 13,500 to 13,600 in the next month or so and then down to maybe 11,800 and then back up for 11/6.  Election year history folks.  High correlation.  JMHO and If I am wrong please fell free to call me any name imaginable because I do know who I"ll be hearing it from.   :)    It's easy to sit and call names so forget about the negative folks and lets hear your ideas?
Aug 22, 2012 3:47AM
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Tony is right: an epic breakout may be near, or...maybe not... lol
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