It's Finally Time to Get Short

It's Finally Time to Get Short
By Jeff Clark
October 6, 2009

"This can't be good."

The bullish percent index for the Nasdaq composite generated a sell signal last week. So the path of least resistance is now lower.

Take a look...

This bullish percent index displays the percentage of Nasdaq stocks trading with bullish technical patterns. It's a momentum indicator used to measure overbought and oversold conditions. Buy and sell signals occur when the index crosses over or under its 20-day exponential moving average (the blue line).

The circles on the chart show the previous three sell signals and the recent crossover.

You can see how they played out on the following chart of the S&P 500...

All three of the previous Nasdaq bullish percent index sell signals preceded sharp declines in the S&P 500. So the sell signal generated last week is a warning sign stocks may be on the verge of a sharp correction.

Of course, no technical indicator is infallible, and no one should make investment decisions on the basis of just one chart pattern. But when you look at all of the indicators we've covered in Growth Stock Wire over the past several weeks – and when you consider the shaky underpinnings of the stock market and the overall economy – this is a pretty good sign caution is in order.

In fact, it makes sense to be more than just cautious. It makes sense to be bearish.

Back in February, I cautioned against selling stocks short. The market had sold off hard for several months. And too many people were looking for ways to profit on the downside of stocks.

Crowded trades are rarely a good idea.

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Today, we have the opposite situation. Stocks have rallied for several months. Nearly everyone is looking for the next great stock to buy. And no one is interested in selling short anymore.

Given the recent sell signal from the Nasdaq bullish percent index, a few well-placed short sales could pay off over the next few weeks.

Best regards and good trading,

Jeff Clark

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•	Natural gas rebounds 80%... nearing $5, up from $2.75 in September.
•	Gold fund GLD nears all-time highs over $100.
•	Brazilian rally continues... fund EWZ hits fresh new highs.
•	Earnings today... Pepsi Bottling, Yum! Brands.

	Last	Change	52-Wk
S&P 500	1062.98	+1.78%	-12.37%
Oil (USO)	34.51	+1.50%	-59.97%
Gold (GLD)	97.05	+0.05%	+12.02%
Silver (SLV)	15.91	+1.08%	+20.99%
U.S. Dollar	77.11	+0.26%	-0.52%
Euro	1.46	-0.40%	+0.97%
VIX	24.88	-2.85%	-28.38%
HUI	398.09	+0.10%	+20.93%
10-Year Yield	3.30%	-0.03	-0.46

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Company	Sym	Industry
Vivo Parti	VIV	wireless telecom
Ivanhoe Mines	IVN	mining
RPM Intl	RPM	building mat
Capella Edu	CPLA	for-profit ed
Telvent Git	TLVT	networks
Impax Labs	IPXL	pharma
Enzon Pharma	ENZN	biotech
Itau Unibanco	ITUB	bank
Philippine LD	PHI	telecom
Jefferies Group	JEF	broker
Valeant Pharma	VRX	pharma
Salix Pharma	SLXP	pharma
SuccessFactors	SFSF	business software
RINO Intl	RINO	industrial equip
BGC Partners	BGCP	broker
AMBEV	ABV	beer
NetApp	NTAP	data storage
Odyssey Re	ORH	insurance
Banco Macro	BMA	bank
Align Tech	ALGN	medical devices
Golar LNG	GLNG	shipping
iGate	IGTE	IT services
Knology	KNOL	wireless telecom
Banco Bradesco	BBD	bank
Invesco	IVZ	asset mgmt
Och-Ziff Capital	OZM	asset mgmt
Hanesbrands	HBI	clothing
Gammon Gold	GRS	gold mining
Schweitzer-Maud	SWM	paper products
Mellanox	MLNX	semiconductors
Internet Brands	INET	business svcs
Wipro	WIT	outsourcing
Comp Brasileira	CBD	grocery stores
Brocade	BRCD	data storage
MarkWest	MWE	oil & gas drilling
CVR Energy	CVI	oil & gas refining
DuPont Fabros	DFT	property mgmt
DTS	DTSI	electronic equip
Cardtronics	CATM	business svcs
VimpelCom	VIP	wireless telecom
TIM Parti	TSU	wireless telecom
Jabil Circuit	JBL	circuit boards
Nu Skin	NUS	personal products
HSN	HSNI	TV shopping
Venoco	VQ	oil & gas drilling
SP Acquisition	DSP	acquisitions
OSG America	OSP	shipping
Brazilian Telecom	TBH	telecom
Brasil Telecom	BTM	telecom
A123 Systems	AONE	electrical equip
Williams Partners	WPZ	chemicals
GFI Group	GFIG	broker
Evotec	EVTC	pharma
United Refining	URX	acquisitions

Company	Sym	Industry
First Bancorp	FBP	bank
Deer Consumer	DEER	appliances
Chemspec Intl	CPC	chemicals
Amicus	FOLD	biotech

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