Sunday, April 13, 2014

Indices Are Oversold

RTS is selling SNDK and buying EXC in its place on Monday 4/14/2014 near the open.
My plan is to buy EXC, but wait on selling SNDK to see if SPX rallies back to its PDL.

Indices Long Term Current and Past Portfolios

It was an ugly week for bulls, but I believe we are at or near the bottom of current selling leg.  There is a good chance that we see more selling tomorrow to test Primary Uptrend Line (PUL) for SPX around 1810 and possibly an intraday panic to slightly below 1800.  After that, SPX very likely rallies to test  its new Primary Downtrend Line and back test its 50 D-SMA around 1840.

The level of "doom and gloom" noise is at extreme high now which in itself is a good sign for bulls.  It's always easy to come up with some idiotic doomsday prediction (without specifying any date for that prediction, of course) and disappear, then to reappear at some point in the future only if that prediction comes true to brag and shout "I told you so".

From a macro point of view, nothing has really changed.  Central banks are very accommodating and have stated that they would step in aggressively to stimulate growth if needed.  Inflation is in check.   US economy is growing at a healthy rate of 3%.  If earnings and forecast continue to be good, chances are good that indices rally back to set new highs.

At this point I believe there is one event that could send our economy into a deep recession and bring about a mutli-year bear market.  That event is a victory by Reps in November mid-term election to gain majority in both houses of Congress.  In that case, we would see the House starting an impeachment process.  We might also see another attempt at shutting down the government and even defaulting on national debt.  More on that later.

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.