Was Friday the start of the next leg down? Hrm, most likely! We broke some important levels that day, so more selling wouldn’t surprise me. Just as things started to look safer, we got the down move I was expecting. Again, I believe that this summer will be a long and hard one for investors. More bad news was due to come out this quarter because last quarter’s numbers were lagging. Many have overlooked the credit crisis but I worry that the pain might not be over for financial companies *cough* investment banks release quarterly results later this month. A crisis like this takes time to recover, I’m questioning whether or not these investment banks are hiding more bad news. Friday’s surge in oil convinced many investors to pull money out of stocks that suddenly seemed too risky. Further, May’s 5.5% jobless rate made some traders believe that this increase in unemployment would leave the Federal Reserve unwilling to raise interest rates. Stagflation are on people’s minds again, so will this bad news continue? Technical analysis indicates that it will…

The S&P500 broke MA(50) so this index is definately in trouble. MA(50) is now acting as resistance along with the others. The closest support we have is 1325 so testing this mark is pretty certain…the question is how soon? An oversold bounce is possible with more news coming out this week, but selling ahead is more likely. With the direction of the 200 day moving average still trending down and support being so far down I think the market is telling us something here:

risk is high and there is severe trouble ahead

We are in a traders market right now. Volatility will be high just like we saw in December 2007 and January 2008. Going long a stock for more than 3 days could be deadly…just remember, the overall trend is down, so take your profits quickly. If you’re not a trader but more of an investor, look to purchase inverse ETFs like SDS, QID or TWM. I’ve explained these “short the index” stocks in several of my previous posts, so take a look back if you want to profit in this down market.

Now I don’t usually post a chart up for the Nasdaq, but seeing as I’m holding QID (the inverse ETF for the Nasdaq) I’ve decided to talk about it a bit. Unfortunately, the Nasdaq is STILL the strongest index of all the major indices. It’s sitting right at it’s trendline so anything could happen from here. A break below this line is more probable, so if it in fact does do this I would expect it to move towards the 50 day moving average and even break past this point.

But hey guys before you go…if you haven’t already, please check out and PARTICIPATE in the “Cooly Amazing Contest” I’m hosting. This is a rare opportunity for you to win some big prize packages at Hedge Against Speculation and best of all, it’s easy to enter. It ends in less than 7 days, so get on it and spread the word

Richard
richard[at]hedgeagainstspeculation.com