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Created on: 5/11/2011 3:28:16 AM   Last Update: 5/11/2011 3:39:53 AM Posted by: RTT
WARNING: This entry is 1575 days old. It may contain broken links, out-dated or misleading content. Please read on with caution.

1 POST Cycles say the bears are about to roar (271)


cycles-say-the-bears-are-about-to-roarThe Stock market pushes higher and higher, what fool would take a short position against this mighty liquidity pump up, however there are a few dark clouds in the next few months: US Summer is seasonly poor, QE2 ending, earnings are peaking, Greek woes. When the SP500 sinks, historically the US dollar rallies, transports fall and funds rotate out of aggressive stocks to defensive stocks. Let's review these cycles to see what we can expected next.

Dow Transports: If Transports fall, this can lead to a Dow Theory Sell signal.
Defensive Stocks: If folks are bearish, they begin to rotate monies into defensive stocks.
US Dollar: If the risk off trade is the theme, then the commodity currencies and the Euro will fall, the offset will be a rally in the US Dollar. A rising US dollar will wipe millions off the sales revenue of SP500 companies, thus earnings will be lower.

Between 2009/10, many cycles suffered an inversion to price, this was due to very bearish sentiment reversing on massive quantitative easing (QE1) from central banks around the world.

The cycles show all are due for a rollover, it is going to be very interesting in the next three months. No wonder sector rotation into defensive stocks is the current theme in the SP500.

QUESTION: Are the bears about to roar ?

If you concur, SPY puts and bearish ETFs should be on your menu near the end of May 2011.


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US Dollar

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Dow Transports

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Defensive Stocks index


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Investing Quote...

.." If you cannot make money out of the leading active issues, you are not going to make money out of the stock market as a whole"..

Jesse Livermore Trading Rule


My experience has been that in successful businesses and fund management companies, which performed well over the long-term, some courageous decisions were taken. Courageous fund managers reduce their positions when markets become frothy and accumulate equities when economic and social conditions are dire. They avoid the most popular sectors, which are therefore over-valued, and invest in neglected sectors because being neglected by investors they are by definition inexpensive. The point is that it is very hard and that it takes a lot of courage for a fund manager to avoid the most popular sectors and stocks and to invest in unloved assets. Finally, every investor understands the principle ‘buy low and sell high’, but when prices are low nobody wants to buy.

Marc Faber




Unless you can watch your stock holding decline by 50 per cent without becoming panic stricken, you should not be in the stock market.

Warren Buffett


Novice Traders trade 5 to 10 times too big. They are taking 5 to 10% risks on a trade they should be taking 1 to 2 percent risks.

Bruce Kovner


..“Because of the extreme challenge, one must commit full attention to it.” Market speculation is “no different than trying to be a successful doctor or lawyer … you simply must devote yourself full-time to the study of your craft”...

Bernard Baruch




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