Wednesday, July 8, 2009

Technicals Continue to Fall Apart

All the stars are aligning and pointing to a potential market collapse. I find it interesting the timing of these technical breakdowns happening just before earnings season hits full stride. I have to believe that it is a sign of things to come.

  1. The VIX is going through the 20 day ma with no problems. Today it broke through the 50 day ma without flinching. A clear bearish signal that this is not just protection by bulls, but purchases of options at higher premiums, thus indicating some rough rodes ahead.
  2. The SPX fell through all moving averages including the 200 day ma.
  3. The SPX 20 day ma is crossing the 50 day ma and the 200 day ma
  4. For you SRS fans, SRS has broken through the 50 day ma with conviction today. Not only that, SPG has had a severe technical breakdown crossing all ma's and looks like the 20 and 50 day ma's are breaking through the 200 day ma. All very bearish for SPG which is the only REIT that may be standing in 12 months.

We have so much confirmation now that we are entering the next leg of the bear market, that any moves up in the market will be short lived. We are headed to the low 800's for sure. The question is, will financials lead, follow or not participate? Will energy and tech and retail lead us down?

shorting SDS is probably the safest play here but SRS sure looks good and SKF may be worth a look for a short term trade here and there. Energy will rebound but not until technicals give a better picture. Tech will be the first to rebound from this next leg down and will probably outperform other areas rather easily. I would rather be overweight in tech than in financials for sure. Therefore, if I were to short, it has to be the overall market (SDS) or financials (SKF, SRS, short KRE)


  1. bs, ung looks ready to turn up based on 60 minute chart. if the market tanks do you think it takes ung with it/

  2. Did you mean to say shorting SDS? I assume you meant short SSO or long SDS?

  3. Gabe, yes, sorry. I meant to play SDS, not short it.