I hope I am way off on my market
direction call but I
think selling off is a lot easier for
stocks than moving higher. The problem I
see is that Stock Earnings have been
good, but the market is being bombarded
with bleak data.
It is always easier for stocks to fall
than to rise. This is always the case.
When stocks sell, they fall quickly. I
was just reading a report on
www.bloomberg.com that state
governments have laid off almost 600,000
employees since the fall of 2008 and
credit crisis.
The unemployment picture just cannot improve and
housing is truly horrible. The unemployment picture
hasn't changed even with QE1, QE2 and I doubt that
anyone thinks any QE3 will change that bleak
picture. If Governments keep bringing in more
austerity measures and cut and slash, there will be
more layoffs. I live in Canada and while our
unemployment picture is good so far, if the US
economy turns down then our unemployment will rise.
All the cuts in Europe have not even got started
yet. When people lose jobs, they cannot spend. When
they do not spend the economy slows. When the
economy slows big ticket items like housing pull
back in price.
Well US housing is already terrible, so how much
lower can it go? Obviously still lower. Earnings
have been great but the XLF is still falling. Here
it is today around 2:35 PM. The problem is earnings
is a PAST indicator and the market is always a
FORWARD looking Indicator and all the forward
indicators right now are bleak at best.
The above chart is why I bought more SPY puts today.
Below is the S&P 500 for the past 10 days. A
distinct pattern of lower highs and lower lows.
Below is the NASDAQ chart for July 15 2011 around
2:30 PM - The exact same pattern and the NASDAQ lead
the way higher. It is now leading the way lower.
My last chart below is the VIX for today. The entire
day has been above 20.00 and this morning it ran
quickly up to $21.68.
The volatility is climbing each day as the 5 minute
VIX Chart since July 1 2011 below indicates. The
pressure to the downside will continue to build and
I believe selling will ensue shortly.
I believe that the market is signaling that it will
correct and easily break the 1300 S&P "line in the sand". I
bought more SPY puts today to hedge my portfolio and all my
options that expired have been closed and the release
capital not put back to work. That capital is going to be
needed in the upcoming future as I believe my favorite stock
prices will be lower than they are today.
