Yale & Jeff Hirsch
About the Editor Jeff is editor in chief of the Almanac Investor newsletter Stock Trader's Almanac, StockTradersAlmanac.com, and the Hirsch Organization. He makes frequent appearances on CNBC, CC, Fox, and Bloomberg. Yale Hirsch is founder of the Stock Trader’s Almanac.
Was April 2 the top for the first half of 2012? Maybe, maybe not. Unlike market bottoms that are more often than not events, market tops tend to be a process. At bottoms, consensus can be quickly reached about valuations and sentiment whereas at tops there is more mud in the water and debate.
Having already issued our official Seasonal MACD Sell signal on April 3, and with markets lower today than they were on the day of our Sell Signal, our analysis remains the same and our posture remains defensive for the next several months. This does not mean that we expect the markets to go in a straight line down. If fact, we would not be surprised to see the markets rally back near their recent highs, but seasonality, fundamentals, the technical picture, and economic data suggest that there is not that much additional upside opportunity in the short-term.
The Fed and most other central banks are currently taking a “wait-and-see” approach. Additional central bank liquidity may come, but not anytime soon. Corporate earnings have been mostly mundane. There have been upside surprises, but estimates were quite low in the first place.Then there are the housing and labor markets. It is becoming increasingly clear that warm winter weather was responsible for their improvements as recent data has weakened.
Slowing Chinese growth, Europe’s ongoing debt woes, and the nuclear ambitions of Iran and North Korea are certainly not going to send markets to new recovery highs anytime soon either. Taking all of this into consideration, we are comfortable taking a defensive posture for the “Worst Six Months”, May through October. And although we are on defense, this does not mean we anticipate a significant bear market to develop. The robust start of election-year 2012, combined with bullish election year forces are likely to produce solid full-year gains, but the path to full-year gains is likely to be rough going for a while. Not a subscriber? Sign up today for a Free 7-Day Trial to Almanac Investor to continue reading our latest market analysis and trading recommendations.
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