Friday, May 25, 2012

Market manipulation?

The S&P 500 index closed the week at 1318, completing a remarkably flat series of closings prices between 1316 and 1321. In the middle of the trading days this week the S&P has been as low as 1296 and as high as 1328, which is a 2.4% variation. The 4:00pm closing prices, on the other hand, have all been separated by less than 0.4%. Not surprisingly, my favorite bear market ETF, HDGE, has also been flat this week, closing at $24.23 on Monday and $24.18 today.

Thursday, May 24, 2012

Holding pattern

So far this week the S&P 500 index has closed at 1316, 1317, 1319 and 1321 - in that order. Nothing has happened to change my mind regarding the market's direction, so I'm still hanging on to my shares of HDGE.

Tuesday, May 22, 2012

No surprises yet

Yesterday's market rally of 1.6% still left the S&P 500 index within the general declining trend of the past three weeks.

In addition the rally slightly improved investor optimism for the day, so for the time being I'm treating this as an expected fluctuation in a continuing market correction.

Monday, May 21, 2012

Slow and steady decline can't last

The S&P 500 index (and the stock market as a whole) has been falling at a relatively peaceful and non-newsworthy pace, and as a consequence has not been generating too much fear despite closing at a 4-month low on Friday.

Eventually the market will break out of this trend, probably with either with a bang or a clunk. If the fall accelerates into a crash, then pessimism will spike and the end of this correction will be at hand relatively soon. On the other hand, a newsworthy steep rally can improve the mood of investors and open the door to more losses over a longer period. Either way I'm still hanging on to all of my HDGE shares for now.

Wednesday, May 16, 2012

Holy HeDGE Batman!

The AdvisorShares Active Bear ETF (HDGE) has been kicking butt recently, gaining 13% in the last couple of weeks while the S&P 500 index fell only 5% or so.

My goal when buying HDGE is simply to gain money when the market falls, and if this ETF manages to gain the same amount that the S&P 500 loses in a correction then I'll be satisfied. The fact that HDGE has out-gained the inverse of the S&P by nearly 3-to-1 so far in the month of May is icing on the cake. There will probably be some brief rallies lasting a day or two during this correction, so HDGE may have some down days before it's over, but that's OK as long as I cash out with a net gain.

The contrarian sentiment of an article about contrarian sentiment

Articles like this one crack me up: Even Pros Don't Like Stocks: Could That Be Bullish Sign?

Every stock market sentiment indicator that I use is still on the bullish/optimistic side of neutral, which is bearish for the market because sentiment is indeed a contrarian indicator. But this article from Yahoo! Finance apparently found one specific indicator, "the consensus view of U.S. equity strategists from major banks", that is actually somewhat pessimistic about stocks and therefore pointing to a bullish forecast.

Even if this one indicator is pessimistic (and therefore bullish) as advertised, there are a couple of flaws with this article. First, the title ("Even Pros...") implies that there are other groups that don't like stocks, but the article itself supplies zero specific examples of pessimism elsewhere, just a quote from one strategist who says "we already know that investors of all types currently hate stocks." Actually we don't know this, because other measures of sentiment are still "pro-stock." The second related flaw with the article is that "U.S. equity strategists from major banks" comprise only a small fraction of all investors, and therefore can never be representative the overall bullish/bearish sentiment in the market.

Most of all, an article like this one that gives a bullish forecast - regardless of the reason - is in fact optimistic about stock prices and therefore just another bearish indicator. Yes, "ironic" pretty much sums up the stock market.

A little more HDGE

After the S&P 500 fell to almost 1330 yesterday, the market has upticked a bit this morning and I've taken advantage by buying a little more HDGE. That's my third purchase in seven trading days.

Monday, May 14, 2012

What bears want to see

The S&P 500 index has broken through the last support line at 1343, closing at 1338 today.

Everything is in place for the S&P to decline to about 1200 from here before starting another rally. Volatility is still low and hasn't yet reached high levels. Sentiment has changed from optimistic to neutral, meaning there's still room to fall before sentiment reaches the pessimistic levels that can re-start a rally. Finally, money flow (which I neglected to check until today!) has been falling from a recent high peak, exactly as expected near a long-term market top.

The best part of being in a bearish stance right now is that I can profit from the short-sighted folly of all those in the USA and Europe who though it was a good idea to borrow limitless amounts of money. If the European Union were to implode tomorrow and trigger a global market crash, I would earn a tidy profit. I don't wish economic pain on anyone, but I know what's coming, and I'll sleep soundly knowing that the worst-case economic scenario can actually benefit me at this moment.

S&P below 1340 in the opening minutes

That's more like it. The S&P 500 index has fallen below 1340 in the first 15 minutes of trading. I expect the S&P to rise and fall over the course of the day, and it may even close above 1350 again for all I know, so I'll put just a little more into the AdvisorShares Active Bear ETF (HDGE) some time today.

Thursday, May 10, 2012

Toying with S&P 1360

The last three closing values of the S&P 500 index have all been within 5 1/2 points of the critical 1360 level.

There's any number of conclusions one could draw at this time, meaning there's no conclusion. We'll have to wait some more before a reasonable forecast can be made.

Tuesday, May 08, 2012

S&P 500 barely climbs out of a hole

I knew it was a possibility - sure enough the S&P 500 index climbed back above 1360 level before the close of trading today, which puts any strong impending correction signal on ice for now. This is why I only bought a small position in HDGE in the middle of the day. Conditions are still favorable for the market to drop appreciably from here, but it may take a while.

S&P Below 1360!

This is the most bearish stock market predictive moment that I've seen in many months, if not years. Short-term investors are relatively optimistic right now, and an example of this optimism is the lack of a blaring headline on Drudge Report, despite a two-month low in the stock market. Sentiment is a contrary indicator, so this optimism is bearish. In addition, volatility has leveled off at a relatively low level for the past few months, and that often occurs at market tops. I've already helped myself to some shares of the AdvisorShares Active Bear ETF (HDGE), but I'll be more confident about this bearish forecast if the S&P 500 finishes the day at 1350 or below. (It's trading at 1350 at 11:30 AM, and it could still rally back above 1360 before the market closes.)