The Best Short-Selling Opportunity of the Year
By Jeff Clark
May 5, 2009
Traders were ducking champagne corks on Wall Street yesterday. The S&P 500 closed in the green for the first time this year. Stocks have erased the 26% loss suffered during the first 10 weeks of 2009 and are now up 0.6%.
Yippee. Let the celebration begin.
Sadly, I left the party a couple weeks ago, when the S&P crossed over 855. Worse yet, I started slowly building short positions. So while everybody else was letting the good times roll, I was feeling a bit like a nun strolling through a brothel.
It is difficult to be cautious as stock prices race to the sky. After all, no one wants to be the lone teetotaler at a fraternity kegger party. But traders should worry about the aftermath.
The best parties are often followed by the worst hangovers. The trick, of course, is to leave before everyone strips naked and jumps into the pool.
We're nearing that point.
Wall Street is ignoring them, but there are plenty of warning signs. For example, two weeks ago, I shared with you a chart of the Nasdaq Summation Index, which was perilously close to a sell signal. I also told you the story of Fran the Taco man, who had a horrible track record of investing and had just turned bullish.
Insiders are selling stock at the fastest pace in two years. The CBOE put/call index – a freakishly accurate contrary indicator – is now at a frighteningly low level. And as you can tell from the following chart, 91% of the stocks in the S&P 500 are now trading above their 50-day moving averages...
Previous readings this high have preceded brutally sharp selloffs.
Stocks are overbought right now. That's clear. And there are times where extremely overbought markets get even more extreme. It looks like we're now in one of those times. So the market can still work its way higher.
Buying into these conditions, however, is rarely a smart move. The risk/reward weathervane is blowing strongly in the direction of risk. In fact, we're rapidly approaching the best short-selling opportunity of the year.
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So while everyone else is dancing with lampshades on their heads and celebrating the 0.6% gain in stocks this year, smart traders are preparing for the next big move.
It'll be to the downside.
Best regards and good trading,
Jeff Clark
P.S. If you'd like to get in on my latest round of ideas to profit from the coming correction, consider signing up for the S&A Short Report. I think a slam-dunk shorting opportunity is at hand... and the profits on one particular trade will more than pay for your subscription. You can click here to learn more. |
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Taiwan Semiconductor up 95% since November... industry giant Intel breaks out to new six-month high. |
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Hong Kong index up 42% from March bottom... triple-digit gains are possible. |
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Secondary education crumbles... DeVry falls 5% to a new 52-week low. |
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Earnings today... ADP, Duke, Genomic Health, Kraft, Molson Coors, Walt Disney. |
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Last |
Change |
52-Wk |
| S&P 500 |
907.24 |
+3.39% |
-35.83% |
| Oil (USO) |
30.56 |
+3.17% |
-67.28% |
| Gold (GLD) |
88.64 |
+1.94% |
+4.80% |
| Silver (SLV) |
12.83 |
+4.23% |
-21.08% |
| U.S. Dollar |
87.95 |
+0.24% |
+19.30% |
| Euro |
1.34 |
-0.22% |
-13.63% |
| VIX |
34.53 |
-2.18% |
+89.93% |
| HUI |
320.85 |
+6.47% |
-19.70% |
| 10-Year Yield |
3.16% |
-0.01 |
-0.57 |
|
| Company |
Sym |
Industry |
3Com |
COMS |
networks |
KBL Healthcare |
KHA |
acquisitions |
Macrovision |
MVSN |
digital distribution |
Seneca Foods |
SENEA |
fruit processing |
Capitol Acquisition |
CLA |
acquisitions |
Insmed |
INSM |
pharma |
Mercury Computer |
MRCY |
digital processing |
Pervasive Software |
PVSW |
security software |
Youbet |
UBET |
online wagering |
Cerner |
CERN |
health care |
Hawkins |
HWKN |
chemicals |
Loral Space |
LORL |
broadcasting |
Orion Marine |
OMGI |
construction |
Taiwan Semi |
TSM |
semiconductors |
Broadpoint |
BPSG |
broker |
Corriente |
ETQ |
mining |
Longtop Financial |
LFT |
bank software |
Inergy Holdings |
NRGP |
propane supply |
Int'l Tower Hill |
THM |
mining |
ChinaCast |
CAST |
e-learning |
Great Southern |
GSBC |
bank |
Limelight |
LLNW |
digital distribution |
NuStar Energy |
NS |
oil & gas pipelines |
Orchids Paper |
TIS |
tissue paper |
Big 5 |
BGFV |
sporting goods |
SP Acquisition |
DSP |
acquisitions |
Lancaster Colony |
LANC |
consumer prod |
National Presto |
NPK |
consumer prod |
Siliconware Precision |
SPIL |
semiconductors |
Critical Therapeutics |
CRTX |
pharma |
KongZhong |
KONG |
cell phone media |
National Bankshares |
NKSH |
bank |
Steak n Shake |
SNS |
restaurants |
|
| Company |
Sym |
Industry |
Magellan Health |
MGLN |
health care |
ManTech |
MANT |
network security |
DeVry |
DV |
secondary edu |
Alumina |
AWC |
aluminum |
CardioNet |
BEAT |
health care |
|
|
| Customer Service: 1-888-261-2693 – Copyright 2009 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202 |
