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*The Rally May Continue Higher & Pops Higher Are Quite Certainly Possible
*S&P 500 Dropping Below Early March Lows Is Very Possible
*Markets Often Rally From Mid-May Through Mid-July. The S&P 500 Has Topped Out Hitting a High on May 7-8th & Topping Above That Level For A Brief Period in Early June. Seasonality Suggests Caution Warranted On The Long Side From At Least Now-Mid July & Again From Mid-Late August/September Through October
*Continued Increased Probability of SPY Reaching $87.53 At The Minimum--But Pops Higher Are Also Possible.
*Managing Risk Continues To Be Key
Much has been written on about the "Lows" put in in early March & Green Shoots. While time may prove those levels to be real Bear Market lows, it is vital for investors & traders to realize that significantly lower lows remain a very real possibility. In early March I wrote that their were 2 camps of technical analysts. The first were looking at a trednline running from the 1974 Recession lows touching the October 1987 Panic Low & reaching to the March levels. That trendline corresponds with the approximate 7,500 day moving average on the S&P 500.
The 2nd camp of technical analysts saw a possible major bounce higher around the 660-685 level & then an utter collapse. That would correspond with what happened in the 1929-1932 era. The first drop was quite large & strangely quite similar in percentage to the drop the market experienced up until March of this year. Then their was a massive rally that lasted until mid April 1930. As I wrote in February & March after that 1st rally in 1929-1930 there were many people who exclaimed the worst is over & that everything was good from there on out. While the current situation may very well turn out differently, there is an outstanding underestimation as to the risk to the downside here. Yes, the bottom may be in for the market & there is astrong possibility thatthe market may pop higher here in the near term, but overall it is somewhat troubling the underestimation as to the stock market technical weakness & the economic problems that persist. As always, risk management is key.
I have included a video from Quint Tatro, a successful trader, managing director of Tatro Capital LLC & who runs "Tickerville". Mr. Tatro or "The Q Man" as he goes by is a Technical analyst & trader who overall sees the possibility of a bounce higher but is quite realistic as to the downside risk that remains. His father, aprofessional Money Manager & Trader for more than 30 years appears in the video & it is mostly his fathers fundamental economic views that are expressed in the video below. As traders will often say, it is important to trade the Market as it happens. Simply seeing long term possible risks to the downside provides little benefit if a large rally ensues from these current levels which is also possible. That being said-realizing the possible risk to the downside is absolutely vital at this point. Over the weekend I thought again about the analysis I had done on the Great Depression Dow Jones Industrial Average performance & thought it would be useful to post charts of the Dow from that period. By showing only the 1st rally in late 1929 many people would have agreed that the market despite the drop looked strong. Managing risk moving froward from that 1st rally would have successfully kept traders out of the market as the next leg down occurred. After watching the Tickerville video, I realized that the video below does a good job of conveying the possible downside risk that I had wanted to write about. Again, lower lows may not occur, but realizing that they are possible is important.
Good Trading
Quint Tatro's Video With His Father Who Is Also A Money Manager Discussing Possible Downside Risks To The Market
http://www.tickerville.com/index.php/site/comments/fathers_day_with_pops/ *ALL RIGHTS RESERVED TICKERVILLE.COM, 2009-POSTED WITH PERMISSION
Mr. Bill Tatro's Web-Site:
Note, While The Overall Fundamental Economic Issues May Cause The Stock Market Collapse Discussed in This Video-It is Imperative Traders Realize The Inherent Problems of Time Decay With The Leveraged ETF's Talked About In The Video. There Very Well May Be Other More Profitable Or Better Risk/Reward Ways To Capitalize Off Of This Market Scenario If It Unfolds. As Always-Risk Management Is Key.
Again, Good Trading From Charting Stock
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Disclaimer--The Above is For Educational Purposes Only, Please read the full Disclaimer below. STOP-LOSS ORDERS MAY BE A HELPFUL TOOL TO LIMITING LOSSES EARLY.
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