In a regular bull market the rise in share prices is backed by general growth in economy, wage growth, falling unemployment and all good things. In a bear market, it is the opposite. There is recession or fear of recession, credit is unavailable, unemployment is high and mood is gloomy. That is what fundamental analysis tells us.
Slope of Hope Blog Posts
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To best depict what we are currently experiencing in today's market, with the bullish euphoria that exists, the belief that European woes have passed, and that somehow it's different this time, let me point you to the movie clip below that comes from "Meet Joe Black". Here you have Good 'ole Joe and his lovely lady friend, being swept away by one another in a coffee shop. But like the market bulls, both parties are completely oblivious to what lies around the corner…
Is it any surprise that Mr. Market, Joe comes back as death himself?
All kidding aside, let me point you to the chart below, which is the basis for my belief showing extreme long-term resistance at today's highs. Notice that this is a five-year chart of the S&P and we are at a resistance level that in years past has been met with extreme selling.
Now, if we can break this level, which I am very skeptical that we will, then there is legitimate reason to believe we would be entering a new bull phase, but considering how overbought we are, how all reversal indicators point to a down turn in this market, I'm confident that we move lower from here, and that we have seen the market's highs already put in.
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Originally published on TheTechTrader.com.
One thing that the Fed and President Obama haven't fixed yet is the number of new home sales…they remain depressed at 2009 levels, as shown on the graph below.
Howdy, folks. Just a couple of comments from me.
First off, I am tantalizing close to crossing the 6,000 mark for Twitter followers. If you use Twitter, be sure to click the Twitter icon on the upper-right corner of the blog so you can follow me. And if you're one of the twelve people on the planet not yet on Twitter, sign up!
As for GLD, I have been avoiding precious metals recently, but today the price got so tantalizing close to the apex I've highlighted that I've created a medium-sized short position. I'll supplement the position if it moves in my direction.
Hedging a High Yield Long Idea
Hey Fellow Slopers,
In a post Wednesday morning ("High-Yield Long Idea Idea Continues Strong"), Tim noted the strong performance of his long position in the SPDR Barclays High Yield Bond ETF JNK. Back in August, I looked at the cost of hedging JNK, but I thought it might be worth taking another look after seeing Tim's post. It turns out JNK is pretty inexpensive to hedge right now. The table below shows the cost, as of Wednesday's close, of hedging it against a greater-than-20% drop over the next several months.
For comparison purposes, I've added six of the most actively traded ETFs to the table. First, a reminder about what optimal puts are, and a note about decline thresholds; then, a screen capture showing the optimal puts to hedge JNK.