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The State of the Markets: Are Bulls or Bears in Control?


From the Buzz & Banter: Markets are made to go up over time, and apparently we're in a bull market breakout.

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

I have been out in the ocean for the last three days fishing like a madman. I came home with zero sleep -- and two freezers full of tuna, snapper, grouper, and more. It was awesome, but I am pretty sore and worn out. That seems to be the case with the markets as well.

I recently liquidated several pieces of my portfolio, and I am down to 60% invested. The weird thing is that, according to my moving average strategy, we aren't due to test the 50-day for another month or so, but according to my breakout rules, we need to close above the all-time high and have a follow-through day.

For now, the bulls and bears are simply battling it out in a very exhausted manner. No one really seems to have the energy to take control.

This tells me we are trying to establish new leadership, and the longer we stay here, the more bullish I will get. Markets are made to go up over time and we are apparently in a bull market breakout.

So why not get all bulled up?

The good is that we are seeing SPDR S&P Retail ETF (NYSEARCA:XRT) come back out of the pit of despair. The SPDR S&P Transportation ETF (NYSEARCA:XTN) held higher through all of this and looks okay.

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The bad thing is that banks are looking like they are double-tapping the 50-day moving average from underneath:

This could lead us to a breakdown if we see a sharp decline in the transports.

The ugly? Emerging markets stink:

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They just got rejected at the 50-day moving average, again from below. This is not good. I have minimal exposure there and am contemplating getting rid of what's left. If I do, I would likely move into Brazil as I see it as the sole emerging market worth considering. A break over $41-ish gives us a move to $42.50 pretty quickly in iShares MSCI Brazil (NYSEARCA:EWZ) while confirming the uptrend.

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So, I am planning to sit back and buy the dip in the S&P 500 (INDEXSP:.INX) if it comes likely against the 50-day moving average, unless I see the transports really break down. The Brazillian switchout seems like a good idea to me too, but timing is important, so I am going to watch it for a few days.
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