Dallas, TX
June 5, 2012, 08:00 EST		 Dr. Joe Duarte's Market I.Q.


The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors

It's Too Early To Make Any Hasty Decisions About This Market
What's Hot Today:
U.S. stocks are likely to remain in a bumpy trend for some time.

Economic Calendar
  • ICSC-Goldman Store Sales 7:45 AM ET

  • Redbook 8:55 AM ET

  • Ceridian-UCLA PCI 9:00 AM ET

  • ISM Non-Mfg Index 10:00 AM ET

  • 4-Week Bill Auction 11:30 AM ET

  • James Bullard Speak 2:15 PM ET

  • Richard Fisher Speaks 7:00 PM ET

  • Charles Evans Speaks 7:30 PM ET

News For Thought:

Trustee thinks about suing MF Global ex-Ceo Corzine. According to The Wall Street Journal: "A bankruptcy trustee blamed former MF Global Holdings Ltd. Chief Executive Jon S. Corzine for events leading to the financial firm's collapse, saying he may pursue legal claims against the former financier for ramping up risks and failing to safeguard money belonging to customers."

The report added: "James Giddens, the trustee trying to recover money for the company's U.S. brokerage unit, said in a 275-page report Monday that he may pursue claims of "breach of fiduciary duty and negligence" against Mr. Corzine and other officials at the firm for revving up the firm's risk-taking appetite without improving controls needed to keep customer funds safe. He cited Mr. Corzine's giant trading bets and failure to put systems in place to prevent improper transfers of customer money. Monday's highly anticipated report was the most detailed autopsy yet of MF Global, which filed for bankruptcy protection on Oct. 31. The firm's customers still are owed an estimated $1.6 billion."

Wealthy staying away from stocks. According to CNBC.com: "Wealthy investors are shying away from U.S. stocks and putting more money into private companies, real estate and commodities, according to a study. The Institute for Private Investors, a wealth networking group owned by Campden Wealth, polled families with at least $30 million in investable assets. IPI found that the wealthy are shifting away from U.S. stocks in the search of safety and yield."

The report further noted: "55 percent of IPI families are looking to increase direct investments in private companies. Nearly half plan to add to their holdings of commodities this year, and 45 percent of respondents are putting more money into real estate. When it comes to stocks, the ultra-wealthy are putting more money overseas. Fully 44 percent plan to increase their holdings of global stocks."

Click on the "Follow Me" button to follow Dr. Duarte on Twitter. He posts frequent updates, including when sections of this web site are updated during the day on his feed.


It's Too Early To Make Any Hasty Decisions About This Market
The Charts Are Still Saying That Caution Is A Good Idea
The market crash that many were expecting failed to materialize on Monday. But the jury is still out as to what may be next. Today we look at the S & P 500 (SPX) and the Nasdaq Composite (COMPQ) as two separate clusters of stocks and see what the charts are telling us.

We are looking at two different indexes via the lenses provided by two different sets of indicators. For the S & P 500, we'll use the graph of the number of stocks in the index that are above their 50-day moving averages along with the index.



Chart Courtesy of StockCharts.com


What we see is that both charts have the same kind of shapes. When the S & P rises or falls, the number of stocks in the index that rise above their respective 50-day moving averages rises and falls with the index. What this illustrates is that the index is actually a good measure of the health of the stocks that are within it. That means that the S & P 500 is actually a well put together market gauge.

You can see that the index and the number of stocks above the 50-day moving average topped out in May and have been falling since. There are also some subtle clues. For example, in April, the S & P 500 made a marginal new high, but the number of stocks above the 50-day moving average in the index failed to match it. The S & P fell right after that but recovered. The number of stocks that fell below their 50-day moving average made a new low. That was a predictor of the market's decline in May.

What we see now is interesting. The index seems a bit weaker than the number of stocks above the 50-day moving average within it. Whether this is nonsense or a sign that the market is trying to bottom remains to be seen. But it is worth noting. If this is a divergence, then we should know in a few days whether we were correct in spotting it. We'll call this a curious, but interesting finding at this moment.



Chart Courtesy of StockCharts.com


Next, we'll look at the Nasdaq Composite (COMPQ) along with its breadth (NAAD) and momentum (NAHL) indicators.

On June 4, the Nasdaq ended the day on a positive note. This was clearly a small positive. But it's too early to tell if it's meaningful, especially when you look at the breadth and momentum indicators.



Chart Courtesy of StockCharts.com


The Nasdaq Advance Decline line (NAAD) made a new low on Friday and a marginal new low on Monday. This is still a divergence, and a negative one at that.



Chart Courtesy of StockCharts.com


The Nasdaq Hi-Lo line (NAHL) is nowhere near a turnaround. This is very negative. We should note that NAHL is often a delayed indicator. In other words, NAAD tends to turn positive before NAHL. Still, the best gains tend to develop when breadth and momentum are moving higher together.



Chart Courtesy of StockCharts.com


Conclusion

Monday's market bounce left a lot to be desired. Simply put, it's too early to make any predictions. The S & P 500 may be starting to put in a bottom while the Nasdaq may not quite be so ready to do so.

We can't make any bold predictions or trading decisions based on what we're seeing right now.

Keep your cash ready to deploy and remain patient.

Trading Plan Review

The market remains in a negative disposition. The short, long and intermediate term trends have turned down. This may or may not change for several days, weeks, or months. We are now on a day to day analytical routine.

Investors who follow our trading models should be holding large amounts of cash at this point. We are now hedged in our S & P timing model but have several potential longs on the list.

Our energy portfolio is short. Our health care portfolio is in cash.

We are back in cash in the volatile gold market. We are in cash in bonds, but are looking to get short. All current guidelines may change rapidly if the market turns.

When you understand the big picture, the next step is how to survive and profit from what lies ahead. That's why we recommend: "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for All Seasons. Also Available As Kindle Books.

 

Market Moves - Stock Of The Day
Goldman Sachs (NYSE: GS) Slipped To Yet Another New Low
Shares of Goldman Sachs (NYSE: GS) made another new low on Monday, yet another sign that caution makes sense in this market.



Chart Courtesy of StockCharts.com


Goldman Sachs shares are out of favor. That usually means that the momentum and inside Wall Street crowd is being careful. When those who trade Goldman are cautious, it's not a bad idea to follow them.

No matter what you think of the company, especially after 2008, Goldman shares are still a good predictor of what the overall market is likely to do in the intermediate term. And right now, they aren't giving us much confidence.

The new low in the stock does come with a few caveats. One is that volume remained fairly steady during Monday, as the stock slipped lower. The other is that despite a new low in the price, both the RSI and the MACD indicators did not make new lows.

The latter occurrence is often a bullish sign. It is not a reason to rush out and buy Goldman or any stock, though. But it is a reason to pay attention.

At some point this market is going to move back into an intermediate term up trend. We want to catch that train early.

Joe-Duarte.com is your own personal trading plan, updated daily. "Market Timing For Dummies" and "Trading Futures for Dummies" offer excellent ways to put together such a plan.

For more details on how analyze intermarket relationships and how to use technical analysis in your daily portfolio managmement buy "Market Timing For Dummies" and "Trading Futures for Dummies." Visit our bookstore.

Follow Dr. Duarte on Twitter
 

 


Other Subscriber Reports are located on the website (log in required). These
reports are updated on a weekly basis (or as conditions require) and are not emailed:

S&P Timing  /  Bond Timing /  Dollar Timing /  Energy Timing
Gold Timing /  Tech Timing /  Biotech Timing

© Copyright 1996-2012, Market Timing Strategies, Inc., All Rights Reserved.
  • Market IQ reports may not be redistributed without permission.
  • Joe-Duarte.com is independently operated and solely funded by subscriber fees. This web site and the content provided is meant for educational purposes only and is not a solicitation to buy or sell any securities or investments. All sources of information are believed to be accurate, or as otherwise stated. Dr. Duarte and the publishers, partners, and staff of Joe-Duarte.com have no financial interest in any of the sources used. For independent investment advice consult your financial advisor. The analysis and conclusions reached on Joe-Duarte.com are the sole property of Dr. Joe Duarte. Dr. Duarte is a private investor and a financial journalist. He trades for his own account. He discloses any positions that he has open in any stock or exchange traded mutual fund that he writes about. Dr. Duarte offers commentary and analysis about the financial markets. Dr. Duarte is not providing investment advice.