Are You Ready For Another Turnaround Tuesday?
by Jeff Clark
August 29, 2006
The market is ready to turnaround today… and that’s not a good thing.
We’ve seen a really nice rally in the stock market over the past month, but now we’re poised for a really nice decline. Many of the market indicators that were so bullish back in July are now flashing bearish – and that’s a very big caution sign.
I wrote the following in the July 25th issue of Growth Stock Wire…
“The market is set up to rally… and rally hard. In fact, given the severe oversold condition of so many technical indicators, I think it’s an odds on bet that the S&P 500 will challenge the 1,300 level within the next few weeks.
But there is one thing that keeps me from being stark raving bullish… September is just around the corner. And September is an absolutely brutal month for the stock market.
That’s not exactly a stunning revelation. Most of us know stocks perform poorly in September and the first part of October. Nonetheless, the market somehow manages to sucker everyone in just in time to pull the rug out from underneath…”
That’s an almost perfect script to describe what’s going on right now.
Here we are, a few weeks later, and the S&P has challenged – and overcome – the 1,300 level. And as we approach the month of September, fear has all but disappeared from the market.
Turn your television to any business station and you’ll see the talking heads almost giddy with excitement. That’s in stark contrast to their gloomy behavior five weeks ago.
Last week, my colleague Graham Summers pointed out the recent decline in the Volatility Index (VIX). I see this decline as a sure sign that individual investors, perhaps inspired by the Fed’s latest decision to pause on the rate hike regimen, are quite comfortable throwing money at the market.
It looks like the market is suckering everyone in just in time… again.
On the bright side, however, September declines usually lead to very good buying opportunities in October. But why suffer through a decline if you don’t have to?
I was a big buyer of stocks one month ago, but I’ll be selling into any strength this week. You might want to consider doing the same.
Best Regards & Good Trading,
Jeff
P.S. To play the rally I forecasted last month, I urged my Big Trend Report subscribers to buy the Proshares Ultra QQQ (QLD). It’s a new ETF that gives you double the upside (and downside) of the Nasdaq 100.
As you can tell from the chart below, it’s been a pretty good trade – up 12% in just one month.
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