Signs of market trouble emerge
After a few weeks of impressive buying, risky assets are starting to weaken again.
Just as the digital ink dried on my last post, explaining why stocks have rallied so strongly through the end of November, the bulls decided to start giving up. Over the last few days, persistent selling pressure has slammed the brakes on what looked like a classic Santa Claus rally to take us through the end of the year.
What happened? Hopes are dimming over an easy short-term compromise deal on the fiscal cliff. Negotiations are deadlocked over the issue of statutory vs. effective tax rate increases on the rich and which party will propose necessary cuts to entitlement spending first.
But the biggest source of worry is what's happening deep within the market. Here's why.
Various technical indicators are starting to roll over. The CBOE Volatility Index ($VIX), Wall Street's "fear gauge," has popped back above its 50-day moving average -- a prerequisite for a downtrend in stocks. Options traders are starting to snap up put option protection against stock price declines on a scale not seen since the September market top. And cyclical, economically-sensitive stocks are bleeding lower in a way that hasn't been seen since the March market top.

While it's still true that some of the economic data is getting better, the market is apparently looking past that into what lies beyond in 2013 given unresolved political issues here at home (fiscal cliff and debt ceiling) and in Europe (how to reaccelerate growth and draw a line under the debt crisis).

Investors have also gone from extreme pessimism in November to aggressive confidence now. By one measure, people are feeling as good now as they have in the last four years. That's looking at the amount of assets invested in the major inverse market ETFs, such as the ProShares Short S&P 500 Fund (SH).
That's a big swing, and justifies at least a short-term pullback.
For now, I'm selling all my remaining long positions and adding some exposure to safe haven assets including the Direxion 3x Treasury Bull (TMF) and looking for short exposure with the ProShares UltraShort Russell 2000 (TWM). I'm adding both to my Edge Letter Sample Portfolio.
Disclosure: Anthony has recommended both TMF and TWM to his clients.

Be sure to check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.com and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
Anthony
My goodness you have some critics! The Market is flipping around like a dying fish out of water. Me, I been pulling the plug and building up some cash and it may be foolish but I'm thinking about some more Gold or Silver type investments and maybe a tiche more water and commoodities.
I'm not so confident in the Market or our Government. Obozo and Congress still have their heads up thier butt. This downsizing think is a massive contraction that may not end for awhile. All these layoffs are part of it. More people out of work means less people spending money and more contraction. They may be necessary because there is so much waste but it's not stopping for a while.
Seems to me, the Governement is fueling inflation and hiding the numbers from the Consumer Price Index. No food or energy in that index. And Obozo and his criminals report an uptick in unemployemnt just before the election, wow what a coincedence and the suckers bought it. 47% are still sucking the life out of anybody with money via the Government and Obozo wants more from the rich to spend on his grand vacations.
Once the masses realize inflation exists big time Precisous metals and comodities are gonna soar. The masses probbaly won't realize this until we get an honest turn up in the economy, the contraction ends and businesses are hiring and workers demand Pay increases. All of a sudden inflation will become apparent to the blind and that will signal the beginning of the end for Precious Metals, Gold anyway, I think Silver and other commodities will still have a way to run due to necessity and scarcity.
Keep wirting Anthony, even the critics are thinking. I like reading you better than that **** Bob Costas. Guns, my other favorite, Costas has it all figured out wrong. He's a Putz!
The Republicans are always the first to limit the income of elderly people by complaining about social security and medicare costs. First they take away the interest earned on savings accounts and certificates of deposits, but they're not happy unless they can take your social security income as well. Raise the cost of health insurance, devalue your home, give them a week and they'll come up with a way to break an elderly person.
Any cretin knew in advance it would collapse AFTER the anointed one resumed his reign.
It has no foundation, the world is falling apart and suddenly the markets in trouble?
Really?
Fire yourself, dumb heathen
hate to say it, but three weeks ago i told you so .....
good post r-t. i read anthony for the market research and he is a smart guy (does good interviews on his feet, etc. - the lights are on) but would never follow his short-term advice as we are not "traders" in any of our strategies, even our "momentum" strategy for high net worth clients. as an "early-adopter" we have been in bearx, ryirx and efu since the S&P was making highs above 1,450 but kept stalling at 1,460 three times running (a chart "table top").
right or wrong i can make a solid case to be bearish at this time and we don't mind being wrong for the right reasons over the short term .... hmmm, i think i just wrote this weeks market alert?
this is NOT investment advice. go see your professionsl financial advisor before making any decisions as your circumstances will vary.
be safe out there ....
Hmmmmm, I find it very intersting, that many come to these Forums and then blog how the Author doesn't know shidt from shinola, BUT, you still come here AND even read the Articles..?
Anthony is like many columnist that contribute here or on many of the other sites that I peruse on a daily basis. There are many other Contributors on MSN and other places that are worthwhile reads...
I like Antman's charts, and one I am fond of is the VIX, but appreciate the RUT2K today also...
I also track them on a weekly basis along with about 20 other Indices, Bourses and Commodities.
His charts are much prettier then mine, because I only "bullet point" numbers...
So I appreciate his...
If any of you think this is 10th. grade work, you are sorely mistaken....It takes much dedication and time... And for him, it is a job.....For me, a hobby and a way to track our investments or keep my mind sharp.....The Markets are ever changing animals, and to stay on top of it, you have to be ever changing also.
There is nothing to indicate that anything but volatility will rule the market for the forseeable futire. Over the cliff or not, the 6 figure layoff announcements within days after the election, and equally as many since if not more, reduced workweek hours, compamies targeting to stay below 50 employees, movement of operations, plants to foreign countries, increases in debt, and many other factors validate, in my mind, that the market is a casino. It is not for investors, It is for high stakes hedge funds, ETF and flash trading.
Proposed budget/fiscal policy on either side of the aisle will not create any net new jobs. Soon enough we will be back to JOBS SAVED accounting but weak demand, and fear among consumers will prevail as the overall component of an economy stuck at recessionary levels. Unless you are a wise and seasoned trader, best keep your assets in cash, even at the risk of the feds continuing to print and devalue the $. Government securities, especially municipal bonds, are equally at risk given the number of insolvent states and cities. Want to by some in Detroit or anywhere in CA?
I am no trader or market expert but have done well the last few years due to luck and good timong more than anything else. Once I had made what I thought was a pretty good return by selling, I bailed and have very little exposure any more. After reading Michael Smiths book, THE BIG SHORT and Neil Barofskys boob, BAILOUT, Idoubt I will ever have any more than pocket change at risk n the market.
Notice why the Dow is up today? BANKS are doing GREAT! They are making oodles of mortgages at rates too low to service on homes without collateral stability and selling them to the Fed for fiat money to invest in American Economy Destroying stocks! Why it even says investors are stoked on new air pumped in the Chinese dead cat economy. My my my... such GREAT reasons to go all in to the markets! There hasn't been ANY job recovery and EVERYONE knows that the nation will crash unless there is. You can't sit around drinking Kool Aid for the next 30 years playing paper games. It requires throwing the administrators OUT and restoring experience ability and competence.
16 days until the End of the World. Like you can't see the runaway freight train filled with volatile stupidity bearing down on us.
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