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.

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