More Shorting Opportunities For Bears

Mike Turner |

All four of the major U.S. Indexes (S&P 500, DJIA, Nasdaq and Russell 2000) are indicating a down week in the market. The Turner Oscillator (more on this below) is issuing a market correction warning. Emerging Markets have a very bearish forecast that lasts into the end of the year. The China forecast is bearish into the end of the year.

The forecasts have been indicating a sell-off into mid-November for months. As you can see in the chart above, that sell-off is still being forecast. As you will see below, I am selling short into this forecast trend this week.

On another front, the IEV (European Index) looks bearish this week (see below), but starting late in the week and on into next year, the forecast looks strongly bullish. This nicely coincides with a more bullish end-of-year forecast trend in US markets than indicated from last week's forecasts.

With all the turmoil ongoing in Europe and the 'As-the-World-Turns' drama unfolding regarding which sovereign nation will next teeter on the edge of financial default, it seems more than odd that the European market would have a strong move higher in late November and December... but, that is what the time-cycle forecasts show.

Of course, time-cycle analysis is oblivious to the machinations of current events, except when exogenous events occur and trigger inversion forecasts. The beauty of this form of forecast analysis is the fact that time cycles are immutable and never changing. Time cycle forecasts are, on many occasions, uncannily accurate. Could this be one of those times? As for me, I am not willing to bet [yet] that the forecasts are wrong about Europe, but I do plan to take a wait-and-see attitude before putting money to work on the long side with regard to the European market.

My trading strategy this week is:

  1. Short the US market, only for this week. Bearish trends are forecast for Materials, Energy, Industrials, Tech, Consumer Staples, Utilities, Healthcare and Consumer Discretionary, including all 4 of the major US indexes.
  2. Overall investment objective for the upcoming week: 5% gold, 20% short, 10% long, 65% cash.

Of course, the above strategies are subject to change based on evolving market conditions.

Can There Be Anything Worse Than An Arrogant Elf?

Even though I distinctly remember that the Elves did not want to give me their forecast for last week, they are now running around proclaiming they, once again, "nailed the market". I for one, would like to nail some of their Elf shoes to the floor as they continually disrupt the real work done here regarding money management, trading and forecasting. Promising to put my hammer and nails down, they did offer the following: "The Bull-to-Bear ratio is 1.4-to-1 in favor of the Bulls. The market continues to be in an overbought condition, but appears to have bottomed in that regard. The Composite Total of Signals (black line) has crossed the red line, which almost always signals a move lower in the broader market. The S&P 500 (green shaded area) looks to be in a topping action and may be getting ready to move lower. Taking profits and considering short strategies is recommended. Note the Bull/Bear Rating has dropped significantly from a [+5] to a [+1]. Long positions could be in jeopardy."

 

Investor Sentiment Forecast
For the Upcoming Week
Investor Sentiment Weekly Forecast
The Turner Investor Sentiment Forecast provides a one-week directional forecast on the market, with [-5] being the most Bearish and a [+5] being the most Bullish. This is predicated on the ratio of number of new Buy Signals to the number of new Short Sell Signals for the previous week. The assumption is investors are becoming more Bullish the more lopsided the ratio becomes in favor of new Buy Signals; and, the converse is true; the more lopsided the ratio becomes in favor of new Short Sell Signals, the more Bearish investor sentiment.

 

 

Turner CrossOver Oscillator
The Turner CrossOver Oscillator provides an indication of the over-bought or over-sold condition of the market. The red line (New Short Sell Index) shows a technical direction and strength (or lack thereof) of investors to push stock prices lower, triggering new Short Sell Signals. The higher the Short Sell Signals line, the more Bearish the market. The black line (Composite Index) is the combined impact of both the new Short Sell Signals and the new Buy Signals and is an indication of the degree of oversold or overbought condition of the market. Buying opportunities exist when the Composite Index is moving higher. The higher this line moves, the more Bullish the market. Market bottoms are represented by a change in direction of the Composite Index from moving lower to moving higher. Market corrections become much more likely the Composite Index crosses the Short Sell Index from above the Short Sell Index to below the Short Sell Index. The market is represented by the green shaded area.

So... I asked them... Are you or are you not bearish? Indignantly, as they looked down their very blue noses, they said that conclusion was obvious and huffed off. Since Elves pride themselves on their 'huffiness', I was glad to see them leave the office.

With my time-cycle charts forecasting a down week and the Elves forecasting a down week, I plan to get some short plays in place early tomorrow morning. I am looking at some of the "Weekly Options" and if the premiums are as attractive in the morning as they were on Friday, I may be putting several trades in play.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
DNN Denison Mines Corp (Canada) 0.53 0.04 7.37 1,805,214
NGD New Gold Inc. 3.80 -0.11 -2.81 4,982,692
XPL Solitario Exploration & Royalty Corp 0.74 0.07 11.24 146,373
TGB Taseko Mines Ltd. 0.92 -0.07 -6.90 1,505,100
GMO General Moly Inc. 0.29 0.02 5.52 109,355
UEC Uranium Energy Corp. 1.07 0.11 11.46 2,053,804
PLM Polymet Mining Corporation (Canada) 0.85 -0.01 -1.62 179,433
HAP.WT:CA Horizons AlphaPro Income Plus Fund n/a n/a n/a 0
URRE Uranium Resources Inc. 1.44 0.04 2.86 1,047,920
USEG U.S. Energy Corp. 1.42 -0.10 -6.58 18,657
MUX McEwen Mining Inc. 2.95 -0.28 -8.67 4,546,113
PLG Platinum Group Metals Ltd. (Canada) 1.83 -0.01 -0.54 542,610

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