CHICAGO, Aug. 19, 2011 /PRNewswire/ -- Zacks highlights commentary from People and Picks Trader "BearMo".
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Beyond the Bear Market Signal: The Death Cross
The media and analyst articles have been filled with the doom and gloom of the dreaded death cross. It is commonly noted as a sign of a new bear market.
I don't want to minimize the death cross signal but I do prefer to look deeper than the death cross.
First, as indicated in DiviMo's blog, I bought SPY CALLS on the last big market down day - thinking was that the market was oversold - and we would have a relief rally. It materialize and as documented, sold half of position on the next up day and then sold the remainder the next big up day for profit both days.
This week, however, there is very little good economic news and an options expiration week. I would have thought the market would move higher. It has not. Instead the market is stuck sideways and heading lower. All one needs to do is look at a S&P 500 chart and look at the 10, 20, 30 day moving averages. One can see the uptrend is already in trouble.
For those who think we had a bull market correction or are still in a bull market then one thing absolutely has to happen. The market - the S&P 500 - it must quickly regain the 1260 level, which marks the lows of the past 6 months.
Once the 1260 is regained, it must hold at that level before mounting another attempt to set a higher high in the market. It does not matter if the S&P 500 regains the 1260 and takes into the fall to mount a new move higher, but it must regain and HOLD the 1260 in order to confirm that the bull market still has some life left.
As I said earlier, the rally, since the panic selling of last week, could easily be a bounce. The market was definitely oversold. In order for the market direction to make a permanent change to the upside, there needs to be more buying and stronger market technicals.
As MightyMo has been stating since the beginning of this year, the keys to the bull market continuation - jobs, housing, financials - are all in trouble. The problems facing the economy are enormous and without the financials recovering and rallying higher, without housing rebounding and without better employment numbers the market direction could be sideways or worse for months and months on.
That said, one can still play this market for profit. . I can say that since I have (as documented) some time ago purchased insurance protection in the form of owning SPY puts (129. 133's). I also plan to gain capital via options plays (see divimo's frequent blogs). There are also some great dividend stocks that have dropped in price providing wonderful yields. I prefer this strategy than cashing out. What are you going to do with the cash, put it into some 4 year CD paying 5 cents!
The market deterioration. It is no accident.
The most recent picks by «BearMo» are:
A sell rating on Suntech Power (NYSE: STP),
a sell rating on Bank of the Ozarks (Nasdaq: OZRK) and
a sell rating on Terex Corp. (NYSE: TEX).
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