Stock Market Choke Points

part 5 Ramming Speed!

by Brian Stoll, TimingStrategies.com | May 5, 2008

As I write, the S&P, basis SPY has pretty much kissed our first minimum “kill zone” price tag target level at 1420 on the S&P cash or ~142.00 basis SPY and is demonstrating the kind of price rejection at this first level that requires us to maintain our recent flat or in cash position temporarily for long only accounts and a low enough risk entry signal to implement a short position of 50% in an indices basket using our Rydex Long/Short EOD system. This is by no means a recommendation to buy or sell any security or to take any action whatsoever in any investment.

At this time and at these levels on the SPY, there are significant cross-currents that mandate no more than a 50% short position due to primarily the massive amounts of “free money” being “given” to the wall street broker dealers and banks, along with the “stimulus” checks being “helicopter’ed” into the public mail boxes beginning to show up right around this time. On these two items alone, provide that significant amounts of money will be showing up in bank deposit accounts thereby further temporarily swelling balance sheets and the ability to re-leverage all over again. (lather, rinse, repeat…ha ha!!)

These and several other technical indicators make a short position at the present juncture a less of a lower risk probability than what was provided by this manager’s original point of estimation at that time when first made, therefore when circumstance change, we must adjust our tactics accordingly. Stop levels for the short position are in place on a daily close basis and this position can go flat, re-establish itself short again or reverse long without immediate or further posting, we deal with markets and their interventions by government entities that have a perverse interest in supporting wall street with yours and my money, I’m not interested in giving any more of it to them than they already take.

The above chart attachment also provides certain “potential” buy levels, lined out in the future with green up arrows for using our Rydex EOD system basis the SPY. The first and most likely test level we have is at ~ the 136.10 price point. Should the S&P make a straight shot right back down below this purported “break-out” of the 1400 level, the 136.10 price tag on the SPY is the first potential price point that we will be looking at to possibly take off the balance of any remaining or current full short position and reverse long or go flat. The other two levels are also lined out with green up arrows and 50%? markers, for the reasoning that again, nothing is written in stone with regards to the market so we depend on price action and other system indicators to manage risk on a day to day basis. We manage money through managing risk first. Our primary function is risk management of any position and only count chickens after they’ve hatched! Also, our website is currently having work done and is subject to being online and offline periodically, if you experience a period of offline unavailability and have any questions in the meantime, please feel free to contact us by phone at 949-675-8889

On a pet theory side note basis, much of the media is flapping about the strong dollar all of a sudden and weakening commodities and the wonderful financials blather…this type of price action can easily persist temporarily and can add fuel to its own feed back loop. If and when it persists to a near term fevered pitch, will be, in my opinion, one of the best opportunities to implement very aggressive contrarian positions for longer term portfolio structure, just an opinion though!

contact information

Brian Stoll | TimingStrategies.com | Registered Investment Advisor
Newport, California | Email | Website

The opinions of FSU contributors do not necessarily reflect those of Financial Sense.