by ilene - May 31st, 2010 12:30 pm
Courtesy of John Nyaradi’s Wall Street Sector Selector
As I look across the global landscape today, I see extraordinary danger and extraordinary opportunity.
Danger comes from the deteriorating economic environment at home and abroad and extraordinary opportunity comes from the enormous volatility and opportunities to “short” the market followed by a once in a generation opportunity to “buy dollars for dimes” once a bottom to this market has been reached.
Over the next five years I believe we will see more bankruptcies, both individual and sovereign, than we’ve seen in our history and we’ll also see more millionaires and billionaires created than ever before.
As individuals we will each make one of two choices. We can assume the “deer in the headlights” posture and stash our money under the mattress, or we can educate ourselves, take prudently managed risk and work to take advantage of the enormous opportunities that will present themselves.
Looking at My Screens
This week we saw enormous volatility in every asset class as global forces washed over the markets of the world and investors/traders tried to position themselves on the only side of the market that counts, “the right side.”
The downtrend that started in April is still firmly in place, notwithstanding Thursday’s rally from oversold levels and we remain in the “Red Flag Flying” mode expecting lower prices ahead.
Taking a look at the chart of the S&P 500 we see:
chart courtesy of StockCharts.com
In the chart above, we can see that the S&P remains just below its 200 Day Moving Average which will provide significant resistance while the MACD remains on a sell signal but momentum is turning up. Above the blue 50 Day Moving Average is rolling over and the 200 Day red line is flattening which is also a bearish indicator.
So for the time being, at least, we remain in a bearish configuration, expecting lower prices ahead.
By the way, if you share our view and expectations of lower prices, this week’s mega rally on Thursday presented some extraordinary buying opportunities on the “short” side with relatively low risk at the moment. I’ll be describing these in detail to my subscribers in our Position/Stop Loss Update this weekend.