May 18, 2011 -They're Shooting All the Generals

Featured Trades: (THEY'RE SHOOTING ALL THE GENERALS),
(GS), (AAPL), (FCX), (GOOG)

1) They're Shooting All the Generals. Those looking for guidance on the medium term trend in the market better take a look at the best of breed, benchmark stocks for the leading sectors; the companies traders call 'the generals'. I am talking about Goldman Sacks (GS), Apple (AAPL), Freeport McMoRan (FCX), and Google (GOOG). They are all telling us that the market peaked last February, not on April 29, as the indexes are suggesting.

When the charts for the stock prices of the best run companies in the most profitable industries are rolling over like the Bismarck, you know that it is time to bail out. That is why I have been a seller of rallies, not a buyer of dips for the past three months.

If you are one of those cynical, glass is half full, tough to convince investors, then take a look at the chart of the financials ETF (XLF). It also peaked in February and has been in a clear downtrend since. There is no way the S&P 500 can make progress when one of its heaviest sectors is suffering from Montezuma's revenge.

Still unconvinced? Check out the bottom chart of trend lines for the S&P 500, when I lifted from my friend, Dennis Gartman of The Gartman Letter. It indicates that we broke a steep trend line in February and are imminently about to break a much more shallow trend line this week.

The bottom line? The best case is that we are nearly three weeks into a 10% correction that will take us to the 200 day moving average for the (SPX) at 1,234; the worst case is that a new bear market has started. Look out below!

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.