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June 16 2013 Weekend Market Comment

June 16 2013 – In the past the saying “Sell in May and go away” did not mean there would be a sharp sell off like there was the prior three years. It just said that summer markets a slow and often end up flat overall. Many of the major players on Wall Street are at the summer cottage or pool side parties and the trading thins out. Markets on low volume often have a notable pull back followed by a summer rally then they enter the dangerous period from mid Sept to Mid October as big money mangers return. These fall months every few years are often where major sell offs happen. The effect is so pronounced that there are those who only play the markets from Halloween until May 1. We had a tiny pull back at the end of April, this year and we have the same pattern again. 

Lets look at our signs, first off the VIX is up as more uncertainty returns. VXX is an ETF that goes up as the VIX does.  I sold my VXX at a nice 20% profit this week as we passed 18 on the VIX. - Always by overconfidence and sell fear. 

(click any graphic to enlarge)

The YP primary sell indicator is below zero again. 

We are also seeing similar warnings from the NYSE % above 50-day chart. 

Most troubling of all is the NYSE new high low indicator. This has not rolled over since late 2012. This indicator shows number of stocks hitting new highs vs new lows.

You might recall this graph from my article called Buy Now? If this is a mild pull back it is not hard to see where the next green arrow will go and then this pull back will be a buying opportunity. But wait for it to turn, don’t get in now.    

But that is the problem, we have sold off a bit, and I am sure next week this sell off will continue. The real question is mild pull back like April or strong pull back like many summers? Well there are some clues and I have selected a strategy but no one knows the markets will do with 100% certainty; anyone who tells you otherwise is an idiot.

First off mild or strong you should be already on the right side of the market because I have told you for a few weeks now to play conservative. The markets are only off 1% this week, but you played conservative, with lots of cash, no new high flyers and broad stable ETFs so you got hit less than most.

Also since things are so uncertain here, you don't need to play here right now. Cash is a position too. What is clearly weighing on the market is the global market is falling apart, you know last week I said the World has caught a cold.  So I play that -- EUM is an inverse ETF that goes up when emerging market go down.

FXP is an inverse China ETF

Gold continues to sell off consider HGD on the Toronto exchange.
You might ask why HGD and not DUST. Well the problem is dust is a 3X ETF these "Juiced" ETFs these are volatile and not for long term holds. Read more here. Or you can watch this video of a guy reading out numbers.

Funny Stuff . . .
I was sent this video this week, really very funny, but while you watch this remember these two countries are nuclear powers. 

 Have a happy Fathers Day.