The SPX advanced 1.74 points yesterday to close at 1153.59. TOT daily traders went 300% short at SPX 1170 on Wednesday and covered the short yesterday at SPX 1145 with a 25 point profit – times 3 units — after the market rallied 5 points above the 1140 level.
The super long term perspective for the stock market remains bearish.
Both the long and short term models remain neutral.
Despite the impressive rally from the lows yesterday, and the market’s modestly positive advance/decline ratio, the daily model is bearish today. TOT daily traders are advised to go 200% short at SPX 1150 stop or SPX 1165 limit, whichever comes first. Use a 15 point protective buy stop on your position, once taken. If not stopped out, carry your position over the weekend and into Monday.
I don’t think the market has fully absorbed the impact of the General Electric story. For those who have not yet seen it, go to www.pimco.com and read the lead story, entitled “Investment Outlook, March 2002”. In it, Bill Gross, one of the best bond money managers in America, explains why he would not buy the commercial paper of General Electric, the largest company in America! After you read it, consider this: He’s not saying he wouldn’t buy their stock. He’s saying he considers it too risky to buy their shortest term (and therefore least risky) debt instruments! Specifically he states that GE’s “foundation is vulnerable,” and “their operations resemble the failed conglomerates of yesteryear such as Gulf & Western and LTV”. By definition, commercial paper is debt with a maturity of less than 9 months. And in essence, he’s saying that he’s not sure of whether it’s safe to buy or not! Hello!… Can you imagine what would happen to the markets – stock, bond, etc. – if the largest company in America defaulted on its debt this year?! Well, whether he’s right or not that it represents an unacceptable risk, a lot of money managers are likely to dump GE stock this coming week, the last week of March, so they won’t have to show large GE holdings on their quarterly report to shareholders. And it’s hard to imaging GE under pressure for the next week without the Dow Industrials and the S&P being under pressure as well. Disclosure: I personally own GE puts in my own account.
Since initiation of this service on September 30, 1993, our daily trader recommendations have gained 6824.22 cumulative SPX points compared to a gain of 694.66 points in the index itself over the same period.
Have a great weekend, Thanks for calling, and I’ll speak with you again in 72 hours.