5-13-2012 Brief with Updates

5-17-2012: The markets have broken down badly as I said they would if they did not hold April support levels.   They then cut through the March support level based on acceleratingly bad European bank news.   It is very good that we have gotten “passively short” and exited VNQ before it took a hit with the other markets as predicted on my homepage (sunandstorm.com).

The VIX had to hold below 19.20 on Friday to keep the market from sliding further, but it didn’t.  The SP500 Index (SPX, SPY) failed to close above April support once again after attempting a comeback.  Although you can never say never, the likelihood is more downside at this point, based on the failure of the reversal, which is a market timing signal.

What do the Bulls have?  The small caps have thus far held the April lows.  The Dow is still above support, so I guess some Bulls could tout that too.  And even the Dow Transports are levitating above support.  The Bears have the banks in tow.  They broke support Wednesday, then reversed above it on Thursday and fell back below Friday.  This is how markets sometimes test important support levels.  Too often I’ve seen markets steepen their losses with even these small drops below key levels.

Tech (NDX; QQQ) attempted to rally back above April support three times and failed.  That is bad for the Bulls as the market leader has been wounded.

Update 5-15-2012: The NDX (tech index; QQQ) is still below the April low at this time.  The first market timing signal of recovery from here would be a move above the April low.  It could then rally to the 50 day moving average before possibly breaking down once again.

Commodities are now in a full Bear 5 market (CRB Index).   Oil does have some support at the Dec. 2011 low, so we’ll see if it holds.  Meanwhile palladium (PALL), platinum (PLPT), gold (GLD), and silver (SLV) keep falling and falling.  At least jewelry is getting cheaper!

Check out the Bonus Chart of the Week and you can see how to make an anticipatory move in the market with the ETFs that hold up initially during a decline.  Now the trick is that it depends on how low things go.  If the SP500 Index drops much further, the REITs (VNQ, RWR, RMZ) and also the Utilities (XLU, UTY) will give up gains as well.  This is why I took my profits from those before they gave back much at all.  If you see the REITS retop, the Bulls will have another bit of strength to point to.

Whatever you do, consider averaging out as I did rather than removing all your money from the market in one move (and read update below please).  You can get back in, even if you have a paper loss when the market reverses.  Yes, you may be a little bit behind, but you have given that up to protect some of your capital.   Check out the passive shorting page on my main sites by searching for “passive shorting.”  I coined the term to help investors learn that there is an alternative to both buy and hold and outright shorting, which most investors are not going to do in my experience.  Shorting requires even more timing finesse vs. being “passively  short.”

Update on 5-15-2012: Some market timing analysts feel 1340 could hold for the SP500 Index and support a bounce, so selling into the next rally may turn out to be more effective than selling here.  One could then move one’s mental sell stop up as the rally occurs.  We are at 1342.81 as I type this, just above that 1340 support level.  We closed slightly below there yesterday, but this is allowed for a test of a support level; however, another close below the March low of 1340.03 would likely lead to a deeper correction.

If you have not seen them, have a look at the charts from this week as well.  They are listed on my “feed page” here:

Market Timing Chart Links (Top 3 links)

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

The above is the text from the 5-13-2012  “Weekly Wall Street Sun and Storm Report™.  To see the current issue and this week’s ratings of all 35 markets I follow and receive the newsletter every weekend, subscribe here: 

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