Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

S&P Watch: Time for Real Caution


Market unable to muster any bounce after this morning's drop.


Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community.

About a month ago, I showed a flipped-over chart of the S&P 500, which garnered a lot of response -- most of you could see the possibility of a head-and-shoulders top in that flipped-over pattern (translating to inverse head-and-shoulders bottoming pattern in the real SP-500 chart).

I followed that chart with a long note on how support hadn't been materially violated, and -- while it was important to keep that thought in mind -- it's not necessarily prudent to act on it.

Here are the closing thoughts from that note, and I would encourage fellow Minyans to go over it again.

Click here to enlarge.

"So, unless support (as defined by your reality) is materially violated in the major indexes and some key sectors, is taking 'anticipatory short' position a prudent move? Even though the market has had 3 up months after we flagged 6 consecutive down months in the Dow (Sep 2008-Feb 2009), I wouldn't be too eager to go net-short the major market indexes until I see firm signs of cracks developing (I do short weak stocks).

"Shorting at every down tick is like stepping up the fight with a strong combatant in the ring with an expectation to win, every time he sneezes! As I have repeatedly opined, strength rarely ebbs away without a fight.

As always, I remain on lookout for instances of confirmation and divergence to check the pulse of the market."

And has the picture changed? Since I shared my concerns on June 12, the S&P 500 has closed below the 50-day moving average, which is its second visit in 2 weeks from lower highs to that level (the 20-day moving average was a strong support. See the May 29 note on recently turned resistance).
< Previous
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos