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Graham Summers’ Weekly Market Forecast (Get Defensive Edition)
Things are
moving quickly now.
Stocks have
taken out the critical support lines of 1,294 and 1,275. We’ve also taken out
the 50-DMA in a big way and are now closing in on the 200-DMA. If that line
doesn’t hold: LOOK OUT BELOW.
I warned
investors to shift into more defensive positions last week. The warning was
well place: small caps suffered a far worse decline (nearly 4%) compared to the
Dow (less than 2%).
Indeed,
we’ve now entered a period of “risk off”. Small cap and Tech stocks, which lead
to the upside, are falling hardest. Stocks in general are in full-scale
correction mode, while Treasuries have begun to rally:
Treasuries
and commodities were ahead of stocks here. And given the sharp rally we’ve seen
in the former (and correction in the latter), stocks still have some catching
up to do.
In the very
near-term, we are oversold and could see a bounce early this week. However,
every rally should be used to get more defensive as the primary prop for the
stock market (QE 2) is ending in the next two weeks.
The one
event traders will be waiting for is the Fed’s FOMC meeting (June 21-22). If
the Fed DOESN’T hint at additional liquidity measures, then stocks could enter
a free-fall (the next Fed FOMC is August 9 2011).
Indeed, the
Fed has gotten itself into an absolute bind. QE 2 bought roughly three months’ worth
of improved economic data while simultaneously blowing energy and food prices
through the roof. With public outrage soaring the Fed needs things to cool down
before it can announce QE3 or anything like it.
The one
exception to this would be if the markets enter a full-scale Crisis and stocks
close in on 1,000 on the S&P 500. The most likely candidate to trigger this
would be the Euro-zone where the “bailout game” might in fact be about to end.
This combined with the ECB’s decision not to raise rates could result in the
Euro currency getting VERY ugly in no time.
On that
note, if we take out 140 on the Euro, that would be a major warning sign that
we could be entering another round of systemic risk.
On that note
if you’re not prepared to profit from the market’s correction, you NEED To
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Again, this
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Good
Investing!
Graham
Summers
PS. We also
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All in all
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- advertisements -
S&P 1040 is still overpriced relative to book and dividend yields. We are no where near a bear market bottom, nor were we in March '09.
Thanks for the update, Graham.
M_M
Thank you, -70 S&P points after the fact, for your sage advice.
Does this guy just automatically get posted here?-try me, I'll write a better article.
By the way, genius, my indicators indicated a short on May 9. Did yours-if not, you suck or if they did, you decided not to tell your sheeple.
Either way, your stuff sucks.
With respect to "With public outrage soaring", I'd love to see a few news reports citing evidence of such rage, either en- or out-!
I heard more outrage about the missing $6.6B that can't be accounted for in Iraq than I have heard about FED policy.
Perhaps a local reality-distortion field has been set up around Mr. Summers
Why doesn't the XEU peak in Nov 2010 fit on the descending trendline? Technical analysis could probably prove conclusively that the world is flat and that the Pope is a Jew.
This guy is an absolutely great copy-writer, and his charts are fun too, but like Bob Prechter, he's cried "Wolf!!" too often.
There is a perma-market for newsletters forecasting doom and gloom, so while he may not have a loyal readership, he does have a steady supply of new customers.
Doom and gloomers were all correct, just the timelines off a bit since no one could judge a) the level of criminality and depravity of TPTB and b) the level of complacency and inaction of the american people.
Oh well theyll all be jolted into a very uncomfortable nasty new reality real soon.
Since Graham Summers can ask people to drop by, so will I.
Anyone wanting a link to my blog, please send me a gmail at my name and promise you will behave. 130 Zero Hedge members can't be wrong.