Arold: Time to short stocks is ending - Benzinga Arold: Time to short stocks is ending - Benzinga

Thursday, May 17, 2012

Arold: Time to short stocks is ending - Benzinga

Arold: Time to short stocks is ending - Benzinga

by Michael Tarsala

One of Covestor model managers I think has an excellent feel for the markets is Michael Arold, who runs the Technical Swing model. He says he's now backing out of his short positions.

“The direction of the trend is still down, but oversold conditions are telling me that a bounce is coming, then it could be time to keep shorting again.” Arold told me this week.

In the short term, Arold thinks stocks are oversold. The put-call ratio, as well as other indicators, are at extremes. As a result, he has trimmed short positions to about 15% of the portfolio, down from 25% a few weeks ago. And he is 85% in cash, with nothing long right now.

Here are five other timely insights from Arold:

1) Volatility is not that high in the big picture. While sentiment readings are very oversold, the VIX, for example, is not at a historical extreme. He would be more bullish if the VIX were higher than it is right now.


2) Currencies continue to dictate moves in cyclical stocks, he says. Materials and energy are two of the weakest sectors. Yet he thinks they would strengthen if the Euro were to change course and rise versus the dollar – most likely on positive news from Greece. It's not time to pull the trigger yet, Arold says, but he is watching the DIG for a possible reversal; it is a 2X levered ETF to the energy sector. Below is a chart of the ProShres Ultra Oil and Gas ETF (the DIG). I market the next technical levels of interest.


3) Arold had positions last month in the defensive utilities sector. The group remains in a strong uptrend. But he says it could be getting long in the tooth. If the market turns, other riskier assets will begin to outperform utilities. Check out a chart of utiliites, relative to the cyclical energy sector, and how it's at a near triple-top extreme.


4) One of his favorite assets to opportunistically re-short is the silver ETF (SLV). He says the recent bounce was predictable. But the longer-term picture for the metal is still bearish. He sees downside potential on a break below $26.



5) Some stocks will see false breakdowns, then eventually be buying opportunities. One of those in the beleagured banking sector is Wells Fargo (WF). He adds that it is not exposed to the same international risks faced by the money-center banks. I marked the next volume support level.



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Stocks Continue to Tumble Ahead of Facebook IPO - Barron's Online

Facebook will launch its hotly anticipated IPO tomorrow morning in a miserable trading environment. The social network’s debut will suck all of the air out of the market on Friday when it starts trading at 11 a.m., but it could just be a temporary distraction. Even generally bullish strategists seem to see few near-term catalysts for stocks.

Large-cap stocks have fallen for five days in a row — the Dow has ended in the red on 11 of the past 12 days. That streak (down 11 of 12) is the worst since 2002 for the Dow. The Dow fell 124 points on Thursday.

Europe is mostly to blame for the drop, but U.S. economic data certainly hasn’t helped. On Thursday, the Philadelphia Fed released a survey showing that manufacturing activity in the region contracted unexpectedly in May, and local companies are loathe to start hiring again.

The daily headlines about JPMorgan Chase’s (JPM) (down 4.3% Thursday) woes are also keeping pressure on U.S. banks. The Financial Select Sector SPDR ETF (XLF) fell 2% on Thursday.

Stocks open lower as Europe overshadows jobs data - Yahoo Finance

NEW YORK (AP) -- Stocks slipped in early trading Thursday as unease over Europe overshadowed an encouraging report on unemployment claims and good results from big retailers including Wal-Mart Stores.

The Dow Jones industrial average was down 48 points at 12,548 in the first half-hour of trading. The Standard & Poor's 500 index fell seven points to 1,317. The Nasdaq composite fell 19 points to 2,854.

The Labor Department reported that applications for unemployment benefits held steady last week, a sign that layoffs are not increasing.

Wal-Mart stock rose 5 percent after reporting a 10 percent jump in first-quarter income, beating Wall Street expectations. It was a big turnaround for the retailer, which had suffered during the economic downturn as low-income customers were hit hard by joblessness and home foreclosures.

Despite positive news from the U.S., investors continue to fret about developments in Europe and whether Greece might be forced to exit the euro bloc, something that investors fear would cause turmoil on global markets.

Greece's caretaker Cabinet was sworn in Thursday and will hold power at least until next month's election. In the recently-held elections Greeks didn't given any party a majority, but they did give strong support to politicians who rejected the tough austerity measures that came with the country's financial bailout.

Without that rescue package, Greece will likely default and be forced to leave the 17-country euro zone, which would destabilize other countries that use the euro. German, French and Spanish stock markets all fell more than 1 percent.

Collateral economic damage is already being felt by other members of the euro bloc.

Spain was forced to pay sharply higher interest rates to raise $3.18 billion in a debt auction Thursday. And shares of Bankia, which Spain nationalized last week, plunged 20 percent on a report from the newspaper El Mundo stating that depositors have withdrawn over $1 billion since last Wednesday.

Oil prices continued to trade lower, falling below $93 a barrel on Thursday, extending a sharp two-week sell-off, as traders worried about the potential impact on global growth from the European crisis. Crude oil has plummeted about 12 percent from $106 two weeks ago.

Energy companies traded lower. Chesapeake Energy fell 4 percent, while WPX Energy declined 6 percent.

Among other stocks making big moves:

— GameStop fell 9 percent after the world's largest video game retailer reported its first-quarter profit fell 9.8 percent, as fewer customers visited its stores and bought new games and systems.

— Sears Holdings rose 7 percent after the beleaguered retailer turned a profit in the first quarter, benefiting from a gain on the sale of some stores.

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Regional stocks: Market slide continues - The Business Journal

All of Central Ohio's 10 most valuable public companies have taken a hit in the past week on the stock market, declines ranging from 4 percent to 17 percent.

The major indices continued their slide on Wall Street.

The Dow Jones Industrial Average closed down 156.06 points to 12,442, the NASDAQ closed down 60.35 points to 2,813 and the S&P 500 closed down 19.94 points to 1,304.

The Davidson 99, which measures stocks in seven western states, including 19 in Oregon, closed down 3.47 points to 168.16.

Among the biggest percent losers regionally were Lithia Motors (NYSE: LAD), which closed down 8.4 percent to $22.14, Paulson Capital (NASDAQ: PLCC), which closed down 7.77 percent to 95 cents and Planar Systems (NASDAQ: PLNR), which closed down 6.9 percent to $1.62.


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GLOBAL MARKETS-Stocks, oil drop on latest euro zone fears - Reuters UK

Thu May 17, 2012 8:09pm BST

* World stocks down along with Wall Street shares

* Gold up 2.6 pct; Brent oil drops more than $2/bbl

* Concerns center on Greek, Spanish banks (Updates prices, adds details)

By Caroline Valetkevitch

NEW YORK, May 17 (Reuters) - World stocks and oil prices fell o n T hursday on concerns about the health of Spain's banks and the prospect of Greece leaving the euro zone.

Adding to pressure on Wall Street stocks was a U.S. government report showing manufacturing in the mid-Atlantic states unexpectedly contracted in May.

The data helped lift safe-haven U.S. Treasuries prices, and pushed the 10-year note yield to just 5 basis points from its lowest level in at least 50 years, while gold prices rallied 2.6 percent.

Worries about Spanish banks resurfaced after a media report said customers of Bankia had withdrawn more than 1 billion euros from their accounts in the past week. The Spanish government said there had been no such exit of deposits.

Shares of the partly nationalized Bankia fell 13.5 percent but recovered some of the losses after the government's denial.

The developments in Spain followed reports that customers of Greek banks were moving funds on the belief the country would exit the euro, adding to broader anxiety about the region's debt crisis.

"The whole equities market is being driven by a macro trade based upon contagion fear in Europe, and really the problem is undercapitalized banks there," said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.

Global shares, as measured by MSCI's world equity index , declined 0.6 percent, and were set for a fifth day of losses along with U.S. stocks.

The Dow Jones industrial average was down 81.32 points, or 0.65 percent, at 12,517.23. The Standard & Poor's 500 Index was down 10.85 points, or 0.82 percent, at 1,313.95. The Nasdaq Composite Index was down 42.57 points, or 1.48 percent, at 2,831.47.

The pan-European FTSE 300 index dropped 1.2 percent, a fourth straight day of declines.

Brent crude futures extended losses to more than $2 a barrel on concerns about Greece and the wider euro zone. Brent July crude was down $2.33 at $107.42 a barrel, having fallen to $107.26, the low for the year.

"The oil market, like other risky assets, is within the grips of uncertainty surrounding the euro zone," said Harry Tchilinguirian, BNP Paribas head of commodities strategy.

Investors followed the heated political debate in Athens, where opponents of harsh austerity measures to obtain an international bailout are expected to win new elections in June.

The euro earlier dropped to $1.2665, its lowest level since mid-January, past stop-loss sell orders below $1.2680 and on course for a test of its 2012 low of $1.2623, according to Reuters data. It last traded at $1.2722, up 0.1 percent.

The yen, though, posted sharp gains against the euro and dollar, bolstered by safety bids.

In the U.S. Treasury market, the benchmark 10-year Treasury note was up 16/32, its yield easing to 1.70 percent, - just 5 basis points from its lowest level in at least 50 years.

Gold prices also rose, with spot gold registering its largest one-day gain since late January.

Spot gold bounced to an intraday high of $1,579.70 and was last up 2.36 percent at $1,575.5 per ounce. That is up almost $50 since it plunged to December lows around $1,527 on Wednesday.

Stocks, oil drop on latest euro zone fears - The Guardian

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