Market Timing Brief™: Spain Pain Drops and Futures Rally (then fade!)

Based on the 6-8-2012 Close published Sunday, 6-10-2012.

UPDATE 10:15 AM ET ON 6-12-2012:  The VIX (VXX) has in fact jumped UP, not fallen down. That was on Monday.  The market got to the market timing resistance levels I said in the text below were key and fell back, so my newsletter readers knew not to buy into that push up on Monday’s open.

I believe that sentiment provides the best guide to what the market will do in the near future.  I think something like last summer may prevail: the markets will retest the prior market timing lows very likely and possibly complete a “swoosh” cleansing “capitulation” move in those tests.  That is what happened last year at a time of LESSER uncertainty. 

The caveat is that if the test at or just below the prior low does not hold, we could then move to challenge the summer 2011 lows.  That would say that the problems we have are much more serious than has been thought by the Bulls for quite a while now. 

So if you buy, buy weakness and have a stop or buy on a strong close above the 5-29 highs for the major indices.  You will be able to get back in on the way up from a point much lower if the market tanks despite a temporary loss.  That is what is called passive shorting, a method of market timing management, which I coined here: http://www.sunandstorminvesting.com/passive-shorting.html

The key to passive shorting is to not freeze in the headlights when it is time to buy during the market’s recovery and not freeze when markets are breaking down in a bad way, which I call “riding the pony down the hill.”  It’s not an amusement ride!

The volatility index (VIX) is at a point where it could jump either way.  Unfortunately, we are very Euronews dependent and the charts get twisted in the direction of that news.  The twist as of Sunday night is UP.  S&P 500 futures are now 2 points or so ABOVE the 5-29 high, but this could wash away as the Greece vote approaches this week.  This is due to a rescue package from the weekend discussed here:  http://www.cnbc.com/id/47751228

So for now, the buying I did last week (reported on Twitter) has paid off.  Taking profits on silver and gold stocks may turn out Monday to have been premature, but profits are still profits in a gyrating market.  The question is whether gold (GLD) and other metals like silver (SLV) will now go up due to the dollar and down due to the dropping of Europanic sentiment from the picture.

Speaking of sentiment.  It worsened a bit last week (cycle ends on Weds at midnight CT), but it did NOT get to extremes.  I am still wondering whether Europe is not going to be messier when Greece turns into trouble, more so than the US futures and foreign markets are saying tonight.  Will this summer end up looking like last summer which was volatility in spades?

Energy stocks look like good buys here.  The US dollar Index was a sell on 6-6.  That is good for oil and the stocks are down a lot and are forming reverse head and shoulders formations on the charts.  See the MTT below for more.

If you add on strength, you still need a stop.  And don’t wait for too much strength as that could simply mark the next pullback.  Buying on the open with futures up as far as they have gone, could be a bit risky.  The key technical resistance point for several indices are the 5-29 highs (See IWO for example).  Over that resistance, and you’ll see more upside.  Slightly over and fail and down we go again.  So don’t set a buy stop point too close to the overhead resistance (and never place such stops in the market, always only in your head whenever possible).

The next stop for the SP500 Index is the 50 day moving average if the party holds up on Monday.  That is where the next resistance is.

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

Links to This Week’s Market Timing Charts

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

The above is the text from the 6-03-2012  “Weekly Wall Street Sun and Storm Report™.  To see the rest of the current issue and this week’s ratings of all 35 markets I follow and receive the newsletter every weekend, subscribe here: 

www.sunandstorminvesting.com/subscribe-to-sp500tracker-newsletter-and-tips.html

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Copyright © 2012  By Wall Street Sun and Storm Report, LLC All rights reserved.

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