Spring Highs For Stocks Already Over?
Cam Hui | Apr 14, 2014 12:07AM ET
Last week was an ugly week for US equities. Though it wasn't that long ago that the SPX made a new all-time high, major averages fell, led by the NASDAQ and small caps. The decline of the SPX violated the 50 day moving average (dma) and ended the week at the bottom of a support zone.
Should the NASDAQ Composite stage a relief rally, an examination of the COMPQ chart shows that the bear case can remain intact even if the index rises to the pictured downtrend line, which is also roughly the level of the 50 dma. The distance from Friday's close to the aforementioned targets at the 4220-4230 level, represents potential upside of about 5%, which is beyond the threshold of many short-term traders.
Sell on strength
In summary, it appears that the intermediate term trend for stock prices is down. It would not be unusual at all to see a mid-term election year correction of 10-20% on a peak-to-trough basis. After which, equities typically present a great buying opportunity into 2015.
I would caution, however, the market is short-term oversold so don't be overly eager to get short the high flyers. You could get your face ripped off by a counter-trend rally.
My inner investor is preparing himself to raise some cash on strength and my inner trader is preparing himself to get short this market should prices rise as anticipated.
Disclosure: Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. (“Qwest”). The opinions and any recommendations expressed in the blog are those of the author and do not reflect the opinions and recommendations of Qwest. Qwest reviews Mr. Hui’s blog to ensure it is connected with Mr. Hui’s obligation to deal fairly, honestly and in good faith with the blog’s readers.”
None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this blog constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or I may hold or control long or short positions in the securities or instruments mentioned.
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