Monday, August 27, 2012
Short-Sell the Market Starting with the Banks?
After scanning SP500 stocks, up popped five of the following US banks indicating sell signals on all of them. When the scans we do show more than one stock in the same sector as a buy or sell in this case, it’s very significant and a very strong possibilty of a concerted move in the same direction by the whole sector. In this case it’s the US financial sector . . . the leading sector of the entire US equity market. It’s not a done deal yet, but we suggest getting ready to sell the five US banks listed below short by next week or shortly thereafter unless the market believes in the grind higher quantitative easing program from the US Federal Reserve.
More Federal Reserve Quantitative Easing to Push Up Stock Prices?
It’s almost the end of summer with the US Republican Convention starting this week to nominate Mit Rommey and next Friday US Federal Chief Ben Bernanke will be speaking at Jackson Hole Economic Policy Symposium. Everyone in the market is looking for clues to more quantitative easing from him and the Federal Reserve or not. Even if he did implement more QE will the market buy into it? European Central Bank Chief Mario Draghi will be speaking there on Saturday also. After September 03 Labor Day holiday many traders will be going back to work after taking their usual summer break from the markets. Trading volumes and volatility should pickup quite significantly. Which way do you think the US equity markets, the US Dollar index, gold, silver and oil are going to go? Below is what we think is going to happen.
We Are Not Buying or Selling Stocks This Week
No buy-long low-risk high-reward stock picks this week with the VIX at a Five-Year Low and a SP500 Double Top at the same time currently. We see the high potential for large broad stock market downside in stock prices around the world starting with the USA equities. With the US equity markets looking topped out with more Federal Reserve quantitative easing or not, gold silver starting to breakout to the upside from their downtrends on hints for more global central banks money printing stimulus that hasn't worked very well anyway, the ongoing European debt crisis and already in recession, a continued China and global growth slowdown, a very real upcoming USA $16 trillion fiscal debt cliff, the still oversupply of USA foreclosed real estate for sale with its shadow inventory not on the market yet and still high unemployment rate, a potential bond market bubble, investing guru Marc Faber calling for a global recession now . . . shall I go on?
Risk and Reward
It’s not all doom and gloom out there but for the most part it is and buying stock equity at this point even dividend paying stocks is a high-risk low-reward venture for the time being in our opinion. We are betting that stock earnings reports and profits will disappoint over the next 12 to 18 months. With the relatively low trading volumes in the market currently, don't be surprised to see a continued melt-up of US stocks with the possibility of the US fed doing more quantitative easing, but with more QE or not, US stock prices look weak and tired and ready to very possibly fall off their own fiscal cliff. After the US Labor Day holiday on September 03, major market traders who've been on vacation for the last three months will be back in the market, and what are they going to do you think? We are betting September to October we could see big volume with stock prices very possibly heading significantly lower. Simply put, there's more chance of decreasing stock prices at this point than increasing prices.
Making Money in the Markets this Week
If you want to make money in the markets, we suggest selling selective stocks short, trading the forex markets with its $3 trillion a day in trading liquidity and daily price moving news events, and watching gold silver like a hawk for signs of a continuation on their recent price breakouts. Long-term we are bullish on gold and silver but with the recent upside breakout of gold and silver, it could be fake-out in the short-term and see prices head lower to at least test the breakout area of gold around 1630. For now we could see the current uptrend in gold hit 1690 to 1740 until a correction sets in. The best time to trade gold and silver is when the USA market is starting to open where you might get a pre-market correction to initate a good entry point to the upside or downside. Chance favors the prepared mind, and there's profit opportunity amongst disaster. We also see oil heading lower too. Implement your risk management tools by using stop-loss in case your positions go against you, having a trailing stop-loss to let your winners run, and not over leveraging your account in case you’re trading on margin. See you next week with more market forecasts outlooks next week.
This Week’s Economic Data Reports
A number of significant US economic indicators are scheduled for publication before Bernanke’s speech on Friday possessing the ability to influence his final decisions and tone. For example, the Fed Beige Book will be posted on Wednesday followed by an important Consumer Confidence indicator later in the week. In addition, investors will be seeking more details about the ECB’s new bond-buying program and, in particular, its bond yield targets.
This Week’s List of Potential Low-Risk High-Reward US Bank Short-Sells
Bank of America (BAC)
Bank of New York Mellon (BK)
JPMorgan Chase (JPM)
Morgan Stanley (MS)
PNC Financial Services Group (PNC)