Sellers Everywhere

Posted on May 21, 2012 by Jan Arps' Traders' Toolbox

Hawk’s Scan Sentry Report May 20

The mood on Wall Street seems to be one of ‘flight to safety’ again with the treasuries doing well amidst the recent equity sell-a-thon, and the precious metals starting to diverge from the plunging equity indexes. This selling appears to be more than simple profit-taking after an extended rally; which means we are not buying this as a pullback. After the S&P June e-mini futures contract broke below 1365, which appeared to me to be the accumulation price for the June contract in early March, anybody that had a long position on that contract was losing money.  I’m happy to say that the resulting sell-off over the last two weeks has been quite orderly providing ample opportunities to enter short. The selling has not had the personality of a panic… nonetheless, we certainly have not seen any herd of bulls willing to accumulate more positions as the price has been dropping.  This week I expect the selling to continue with pauses as it runs into support at 1275 and again at around 1250. The news pundits will give you lots of after-the-fact reasons for this sell-off, but few will tell you the real reason... there are more sellers than buyers!

I generally try to trade in the direction of the overall market trend, this gives me wind at my back. Clearly the current trend is down and I expect to be selling short again this week. Please note that even though I do not expect to be trading on the long side, I am still preparing myself with buying opportunities in case the market does not do what I think it will do. Although, in general, my technical analysis has proven to give me an edge; the markets are a fickle mistress and she will do what she wants, not what I want or expect. As a consequence, my best strategy is to be prepared for the unexpected.

In addition to the typical trading signals provided by the Arps Scan Sentry Toolkit, this week’s selections have all been filtered by their relative performance compared to the S&P index ETF “SPY”. The long picks have all being doing better than the ‘spider’ over the past several weeks. The short picks have all been weaker than the index over the last several months.  As always, if you want more information about the indicators on the charts below please follow this link to a webpage with more information.

Here are some of the symbols on this week’s watchlist and why they are there.

_____Longs_____

T

(AT&T broke out of a flag pattern and pulled back to the breakout price where we got a Pullback 23 signal. Also Radar1 Fear/Greed and Radar3 Trend Strength and the Triple Trender are all bullish in a very bearish market .)

WG

(With all three Triple Trenders bullish we also have a bullish Pullback 23. )

LOGI

(Another stock bucking the trend in a bearish market. In addition to the Arps Radars 1,2 and 3 and the Triple Trender all being bullish we also got  a recent Trendline breakout signal .)

_____Shorts_____

IMOS

(Here we find a breakdown from a Bear Flag pattern which was the first pullback into the bearish Triple Trender accompanied by a breakdown across the up trendline . Also, Radar1 Fear/Greed just turned bearish after very weak buying.)

SAPE

(After pulling back into the bearish Triple Trender and filling the gap from early May we now get a bearish Pullback 23 signal.)

COST

(A pullback into the Triple Trender which created a ‘Pullback Divergence’ with the Radar2 Price Leader .)

Again, last week’s selections did nicely. I only traded to the downside and did particularly well with ESRX. I hope you did too.

May the trend be with you,

Hawk

Jan Arps’ Traders’ Toolbox is not an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Examples presented on this site are for educational purposes only.  It should not be assumed that the methods, techniques, or indicators presented in these examples will be profitable or that they will not result in losses. There is a high degree of risk in trading.  Readers using this information are solely responsible for their actions and trade at their own risk. Readers should always check with their licensed financial advisor and their tax advisor to determine the suitability of any investment.

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