Hello traders! I’ve decided to make a quick post before calling it a day. We saw more selling on Friday as investors panicked about oil’s rise and its affect on the economy. Renewed fears on the still-slumping housing market and ailing financial services sector caused increased profit taking. Is reality starting to finally set in? Housing, spending, and manufacturing data will be released this weak…and unfortunately, I don’t see any positives coming out from this. Further, technically speaking the indices look extremely weak. The NASDAQ is still the strongest out of the bunch, but big names like GOOG, BAIDU, AAPL, and RIMM don’t look like they’re moving any higher. Let’s take a look at the S&P500:

We ended the week below 1390. This level has acted as resistance since 2006, breaking past this mark two months ago was a great achievement. The bullish run we had was fair, but as of today we are below this important level once again. What was support last week is now resistance! For us to be bullish again we need to break not one, but three resistance levels. To be honest, we have a much better chance of testing 1325 than retesting the 1440 high. If we break below the 50 day moving average, we are bound to test 1325 (the next support level). Looks like the “sell in may and stay away” notion is now in effect. I’m hoping some of you got into some shorts Friday, if you haven’t and still want to take full advantage of this weak market you may want to consider TWM. This ETF shorts the Russell 2000 and is the most volatile ultrashort index, but if things work out you’ll get the most bang for your buck. You may want to wait for a bear pullback though, the market should take a breather at MA(50) before heading lower again.

Oh and just another reminder, Hedge Against Speculation’s Cooly Amazing Contest begins June 1st…don’t miss it!

Richard
richard[at]hedgeagainstspeculation.com