Beware this seductive mini-rally, US retail sales are down again!
Posted on 14 July 2010 with 1 comment from readers
US retail sales fell by a more-than-expected 0.5 per cent in June after a 1.1 per cent fall in May. Auto dealers fared worst, down 2.3 per cent to an annualized 11.1 million vehicle sales, still five million short of pre-crisis days.
Given that the US consumer makes up 70 per cent of the economy this is not good news. Housing is still deep in recession, lest we overlook that other economic bellweather sector.
Go short young man!
Stock market commentator Mike Swanson got the message right:
‘Personally I have turned bearish on the market for the rest of the year and believe that this rally will be a good time to lighten up on positions and to go short if you want to make money, but a lot of people are skeptical of these views. This morning I got two emails from people disagreeing with me.
‘Historically the market tends to pop at the beginning of a quarterly earnings period and then top out in the first 3-10 days of the earnings season. Even in bull markets it usually peaks and corrects.
So I would not get too excited about earnings and would NOT buy a stock that gaps up on earnings news no matter how hard the analysts pound the table on buying.
I know that is hard for most people to do. They associate the stock market going up with making money and want to be a part of that. That’s why rallies in bear markets just suck everyone in and people have such trouble using them to sell – especially when everyone on TV gets excited.’
Financial TV
Beware summer rallies and the excited pretty talking heads on CNBC and Bloomberg. They are paid to turn heads not to provide useful investment advice!
Mike Swanson goes on to endorse the ArabianMoney approach since May of using short ETFs. He even talks about taking options on these instruments but that is perhaps too aggressive.
This might be a losing strategy for a while but you will be there for the turn, whenever it comes, and it could be dramatic and totally unexpected – keep your short ETF positions and you can go away on holiday and not miss anything really dramatic.
1 Comment posted by readers:
You don’t go short during the last week of options expirations when quarterly earnings are due out. You go short the week after options expire and towards the end of earnings reports. My guess would be to go short next week some time.
Intel had good earnings which means someone bought a ton of components which also means someone sold a ton of pc’s so earnings from companies like Apple and Dell should be good. Alcoa also had good earnings meaning anyone buying aluminum also had good sales so car manufacturers most likely will report good earnings.