Stock Market Choke Points

part 5 D

by Brian Stoll, TimingStrategies.com | June 23, 2008

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From our last update on June 9 part 5C the estimation was for “potential” long entry points at pre-spec. levels that had been lined out through out the year. Our first level on the SPY was ~133.- 132.50. We got that level last week Weds. 06/11 went long 30%, sold it and reversed to a 25% short position on Mon. 06/16 and then spread a long position 30% in the Banking/Financials sector on Weds. 06/18 against the short 25% position. The reasoning for that change in estimation of management is due to the divergent price action being demonstrated by the NDX & R2K vs. the S&P & Dow. This domestic market divergent “conundrum” will be resolved ultimately lower by the NDX & R2K in my estimation. 

Several of the reasons for the spread long in the Banking/Financials sector were due to… 1.) FOMC meeting next week 2.)End of quarter and window dressing that should see the last of the short term selling in Financials. 3.) 4rth of July confidence engineering by the Fed/Tres. 4.) Deep oversold market technicals that meet our short term requirements and price targets. Spreading our short position instead of opting for a straight long is due to the fact that fundamentally, in my estimation, this is going to be a significantly difficult bear market that will last for several years. I prefer to just get short 100% or more and just take a nap for a long time, the problem with that type of approach is the propensity for the Fed/Tres to impose their mischief on the markets designed to trigger sharp and violent bear market short cover rallies. If there is going to be one of those in the near soon, it is becoming more evident that the Banking and Financials will get the most juice.

Today’s price action Friday 06/20 sets up the “potential” for just that sort of move for next week. Our target for a “potential” 50% straight long position in our Rydex EOD indices basket of at ~131.50 on the SPY has been met, although, the resolution lower into our ~129.50 area on the SPY is gaining greater evidence as well and our target of ~124.00-122.00 on the SPY is where the real buying looks like it will be for this year as the Emerging Markets via the EEM and other ETFs’ are signal significant break down follow through.

Any one interested in learning advanced Elliott wave and oscillator theory, there is a new E book out by Richard Johnson titled Finding Cycles. I have not yet finished its contents but it has been very interesting and enlightening thus far. I will be providing a much greater detailed client update with specific sector position summary next week for the second half of the year, until then enjoy the first weekend of Summer 2008 

© 2008 Brian Stoll
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Brian Stoll | TimingStrategies.com | Registered Investment Advisor
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