Market Timing Update at 5-21-2012 near the open and at close: There was indeed a bounce and I’ve begun re-entering certain markets as reported on Twitter (see feed to the right).  Whether the market will bounce to the nearest resistance and fail is to be determined.  Europe cleared a bit over the weekend in public resolve of the G-8, but the problems are not solved.  Silver (SLV) is a trading buy at the close (also reported on Twitter prior to close and second buy after the close).  The biggest note of caution is that the European markets were only up a bit or even down in some cases by 0.65% in the case of Spain.  Our markets had a much better day.  Expect further catch up in the European markets if our rallies are going to hold. 

NOTE on 5-22-2012: Please follow me on Twitter (look just to the right) to get further updates.  The markets are still volatile and there are mixed Bullish and Bearish signals as mentioned in tonight’s Tweets.  The Europeans are meeting tomorrow and if they fail to satisfy the markets, our markets will pay the price.  A rally could also ensue if their actions are viewed as strong enough.

Once enough gains have been wiped out as they now have, you have to be more cautious about shorting or going passively short too late.  I’ll be looking for what appear to be valid bounces in the markets and report them on Twitter during the week as I am able to.  As I mention below, gold appears to be one such market at least if you are willing to take a smaller loss to achieve a greater gain.  So take the “SELLs” in the table below with a grain of salt, because we could turn up soon with some caveats.

Last week I commented about how the REIT Index (VNQ, RMZ) and utilities would catch up the general market slide – they did, with the REITs falling faster.  Utilities continue to sell off today with the UTY down 0.17% in the morning though attempting to recover (and the REITs are attempting to hold a rally on Monday, 5-21).

The volatility index (VIX) has blasted up through resistance and has plenty of room to rise further while the SP500 Index falls.  The banks are breaking support.  Housing, already mentioned, is on some support that must hold.  March 2011 support is last support before larger losses accrue.

The losses can be stemmed at any time with massive central bank action to reverse the European slide, but the markets have not yet turned.  That is the risk to the shorts.  Well, except for gold.  Gold hit an important support level and via Twitter I said it was a trading buy on a market timing basis with a stop on May 17^th: https://twitter.com/#!/SunAndStormInv/status/203134847722594305  The silver ETF, SLV, has retested fairly close to the Dec. 2011 low of 25.65 (reaching 25.99) and is now just below the Sept. 2011 low of 27.41 (UPDATE: closed above on 5-21-2012).

Investor sentiment may have finally become bad enough to support a rally.  Investor sentiment is about where it was in terms of the Bearish percent (45.97% this past Weds.) back on 9-29-2011 (46.79%) according to the AAII at AAII.com.  That was fairly close to a bottom in the markets, but there was one last whoosh down with a snapback recovery.   We may well see a similar quick plunge to wash out the fear based investors and then a recovery or we could slowly climb from here in the absence of Euro horrors this week.  I would not bet the farm that the sell-off is over, but I would take profits quickly on short positions in either a capitulation selling scenario or a gradual recovery from last weeks lows.

If you have not seen them yet, have a look at the charts from this week.

Links to This Week’s Market Timing Charts

Enjoy your week! 

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

The above is the text from the 5-18-2012  “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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