S&P 500Here is an update of the daily S&P 500 chart. You can see my system has me short as of Friday's opening. This is a short term trade that will be exited on Monday's opening. My big picture timing system is ever so close to giving a sell signal now, it just missed on Friday's close.
Not to worry because most significant highs are not made in February, so we will probably go up itleast one more time. My short term signal was based on entirely different parameters than the big picture system.
Notice large divergence that continues to be in place with the Bond market below. This at some point is going to spell trouble for stocks, and it may already have triggerred something. The small graph at the bottom is just a moving average of the tick index. This is something I am playing around with, but have not really found any use yet for. It can be ignored.
The commercials have also gotten heavily short as of this last weeks report, so it is only a matter of time before a decline hits.
4 comments:
It's 1am and so far it looks like it would be safe to that keeping that short position open for today Monday would be a good call. I will check back after the close to see if that would be true.
I saw that you posted your email on Lansner's blog about the short positions on the lenders. I definitely would be interested hearing more about that in buying put contracts. I may be able to add some insight as HSBC was one of the more conservative lenders.
I just looked at HSBC and that stock is very lightly traded and still in an uptrend. I would not short that one. Buying puts would be the way to play the thin stocks like that in case a squeeze were to take place. I will post a chart on something tommorrow showing what I would consider to be an ideal setup shorting a lender. I urge people to be careful falling in love with an idea.
There is no question this sector has some trouble, however, some of the weak stocks have already been crunched, and others still have good last 12 months earnings.
Honestly I didn't think the lenders were going to have the break down that they are having now until after the second half of the year. As for my insight really isn't on HSBC because they were one of the more conservative lenders in the sub-prime world. Argent, New Century, Fremont and even Countrywide's sub-prime unit was more aggressive. So I am looking into CFC (a Cramer favorite) put contracts because their price has stayed up there but looks like it could have an uptick looking at the stochastic. LEND (another Cramer best of breed) has nice chuck of short interest and NFI has even more. I am not falling in love with the idea but I am still kicking myself on the homebuilders especially DHI.
High levels of short interest is actually a bullish item, so do not judge what you do based on that. Now, with that being said, it needs to be high in relation to other prior levels in a particular stock, not just as an absolute. LEND has fallen so far already, that you have missed the boat on that also. It could continue lower, but it has moved down a huge percentage already. Try to find one that has just broken it's uptrend, then short the first retracement or bear flag as we call it. Once you have several bear flags that work, the odds on each one working going forward diminish, especially after 3 of them.
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