Acorn Wealth Corp.

Tonight we now know that Greece has had its bailout package approved to save it from a almost certain disastrous default in March. However despite the good news the over-seas markets remain basically unchanged. both the Nikkei and Hang-Seng in fact moved down on the news.  If this seemingly good news can do little to push the market in the up direction we must wander how much hot air we have already pumped into this system.

I feel more fearful of this market this week than ever before. After an incredible rally for months on end now i spent the greater part of my day this morning looking for ideal setups for shorts. I looked for stocks with more than a 20-30% short float, that were in a rising wedge formation (bearish formation) as well as having a reasonable level of volume. What i expected was to find a series of stocks that had a high probability of dropping due to the combination mentioned above. What I found was something much more startling:

IShares Dow Jones Transportation Index (IYT)

SPDR S&P Regional Banking ETF (KRE)

ISHARES Dow Jones Real Estate ETF (IYR)

Materials Sector SPDR (XLB)

The Russell 2000 (IWM)

Essentially my research is telling me that five of  the most important barometers of  our economical recovery area setting up for an ideal crash pattern.

Oh…. dear…..

However before I got too excited about these shorts one of our other coaches words suddenly started ringing in my head ‘Which means if the market does indeed rally and there is a 30%+ short float on all major indexes think about the explosiveness of the short covering.

I have a feeling this is going to be one hell of a week. I am now much more weighted towards the shorts than anything else. Could we go higher? Sure. However i feel that the higher we go, the harder the fall and we all know what happened to Humpty Dumpty.

Message of tonight – we have found hardly any longs and tons of shorts.  However whatever you play keep your stops tight as there is danger in both directions.

Strong number on the jobs reports and Philly Fed numbers pushed the indexes higher today breaking a new high on the S&P 500. The 1,360 level was not broken however and new highs were certainly not made on indexes such as the Dow Jones Transport and the Russell 2000. It is still a coin flip market and sending many traders heads into a bit of a spin.

Hi,

I thought it would be good to send out a quick update on the market. Below is an hourly chart on the ES. It has run into an area where I feel we will see some intraday weakness. This does not mean that we have confirmation that the market is breaking down. It will need to break down below the circled support area before we have that confirmation. The current zone is where we might find some short term weakness to trade.

- Acorn Wealth Corporation

The Dow Jones Transport looks like it has broken down hard again today.While the S&P broke the highs of last week during intra-day trading today it gave all the gains up as the day went on. The S&P index is yet to break major support at 1,330 so it is still early days and the descent not yet confirmed however the Dow Jones Transport to me warns of early signs this market could break down hard by the weekend.

There was also a great article on MarketWatch last week (http://www.marketwatch.com/story/the-insiders-are-selling-heavily-2012-02-09) discussing the recent record high levels of insider selling. This mass exodus of insiders matches the types of levels of selling we saw in July of 2011 right before the last big drop in the market.

From a more technical perspective the Russell 2000′s 9 and 20 day moving averages are points away from crossing one another in a bearish formation leading me to believe it is likely we will see the Russell 2000 touching the level of 80.00 by the weekend and potentially heading lower towards 77.00

When you see stocks such as Freeport-McMoran completely breaking down. Apple falling from its pedestal and BHP falling 6 dollars from its high it is most certainly time to be very cautious and looking for the opportunities in shorts.

Despite the move up in the market today we are still feeling very cautious as to the future direction of the US markets. While the S&P based on hopes that Greece is coming closer to being able to receive a second bailout the picture at the end of the Fridays market was telling a different story.

The Russell 2000 (IWM) had clearly broken below the 9 day moving average. The Dow Jones Transport index ($DJT) had broken the 9 and 20 day averages.
The market technically is still in a bullish mode however our stance on taking trades still is very neutral as we feel this 1,360 area will be an important

Dow Jones Transport Breaking down through averages Friday – Scary signal.

S&P 500 approaching Fibb extension

Another week is almost over we’ve had small gains in the market this week. And once again accompanied was very light volume. We feel we’ve reached a critical jump here in the market. The Greek situation has apparently reached some kind of settlement. But we have few details as to what type of arrangement has been agreed upon. The market has a very tepid response to this factor. Whatever the case there are very difficult days ahead for the Greek people and the politicians that manage their affairs.

On Monday February 13th, 2012 the Obama budget will be released. It will be interesting to see how the markets react to this document.

We feel that there is no big edge being heavily committed to these markets at current levels. We are more than happy to wait for a significant price break either up or down before we take on any significant trading positions.

Little again has changed as the market continues to ponder as it wanders. The rising wedge formation on many exchanges such as the SSEC (Shanghai Composite Index) would suggest tomorrow should be a down day back into the channel however the opposing bull argument would be that we are moving towards a breakout.

We are not about to simply guess whats around the corner and see what is around the corner and that is what we see is the opportunity at this time.

Little changed today as markets continued on in a sideways fashion. Even the Dax’s upward roar came to a pause as it stage a day of indecision creating both new highs and lows as compared the Mondays trading. The main focus for us remains to be looking at this week as one of big question marks and direction hunting.

The bulls are still behind the market in terms of support from the traditional indicators however the 1,360 -1,370 will need to be broken before the next leg will be able to confidently run.
The main point of concern is that if we did break down hard in the next week or two there could be a vacuum created as much of the money sitting on the sidelines would most likely stand aside and let the market drop as it catches up with the reality of Europe. Either way i urge investors to not try and predict what is around the next corner but rather deal with what is right in front of you and if at any point you are unsure, simply step aside.
There were no stocks in fact out of 5 scans we ran that came close to the parameters we look for. So for now we wait a bide our time waiting for the opportunities to show themselves.

10 year yields dropped further to 1.90% from 1.95% Friday as the security of the greenback seems to look more and more enticing. The reason for this of course is there are still big problems in Europe that seem to be being ignore for the meantime. All indexes have stormed ahead last week continuing their ongoing rally and the question looming in most investors minds is of course – until when?

The Greek situation we feel will only get worse until it gets better which would mean trouble potentially ahead. . 1,370 on the S&P 500 is only 26 points away and this would mark the height of the market from May 2nd ,2011
Either way its a good time to pull in your head and allow your existing positions to play out. If the market continues to shrug these issues off further i feel it is likely we will rally to 1,430-1,450 and the see the big break happen then. THAT would most certainly be the time to look for shorts if we get up there.

Russel 2000 and Dax continue their divergence away from the Dow and S&P 500 short sellers still remain cautious to start loading on the positions and money is still quite prepared to sit in US treasuries. Not for a big yield but for preservation of capital.

We are still very cautious of this market and will remain to be until we see a strong pickup in demand and that means we will need to see GDP much higher than a 2 or 2.1%.

Tonight we reviewed all stocks in the S&P 500 index and found very few stocks that did not already seem to be overstretched or ,at the very least, due for a healthy pullback. Currently our position remains the same. We are neutral on this market and feel very reluctant to call the market direction. There are signs to point to the bulls and there are signs that point to the bears.

All we know is that the market seems to of been able to kick the can further down the road and for now … we enjoy the rally.

Greece still needs to be addressed, money will still need to be printed and then there’s the ever rising US debt ceiling. The point we would like to make is that this is not a time to roll the dice in the hopes the market changes direction in an hour a week or a month from now. Trade your stocks that meet your rules and trade cautiously.

Important points to consider is despite the Russell 2000 index breaking new highs, it is generally a lagging index and until we see the Dow and the S&P 500 break its overheads resistance (1,333 for instance on the S&P) the rally is in a consolidation move. While it seems unlikely at this very moment ,if the S&P were to break 1,300 this would be where we would look to pile on shorts.

In the short term I see a likely short term pullback to test the support at 1,321 and then possibly 1,307 -1,305.