Stocks retreat as Fitch downgrades Spain’s debt – What did smart money do? Plus more contrary picks May 28, 2010
Posted by Marlowe Cassetti in DOG, DXD, SH, TLT.trackback
Stocks closed out their worst month in more than a year by sliding again on more unsettling news about Europe.
The Dow Jones industrials dropped 122 points Friday after Fitch Ratings gave Spain the second downgrade of its credit rating in a month. The rating agency’s action was another reminder to traders of the long-term economic problems still facing several European countries, and pehaps the rest of the continent and the global economy as well.
May was difficult as persistent and intensifying worries about Europe’s debt problems sent the Dow down 7.9 percent and the broader Standard & Poor’s 500 index down 8.2 percent. Both indexes had their worst monthly performance since February 2009, the month before stocks began their recovery from 12-year lows. The Dow lost nearly 872 points, its biggest point drop ever for May. (market commentary & photo courtesy of AP News via Yahoo Finance)
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I monitored yesterday’s RSI pick, iShares Barclays 20+ Year Treasury Bond (TLT) throughout the day and it appeared to be languishing, but with a small positive bias (it did gain 0.45%). That’s okay since it could be building a base in the vicinity of $96.50. I will continue to monitor over the next few days for a possible buy.
RSI’s other pick was much stronger today, up 1.26% coming mostly in the last 15 minutes. Rather ominous going into the long weekend. Someone wanted to hold the market short as they enjoyed the long weekend. Was it smart money?
So after the bell, RSI piles on to the contrary side with these two picks:
- Buy 280 shares ProShares Short S&P500 (SH) Stop -$3.51 Alert Target = +$5.85 Volatility = 5.6%
- Buy 300 shares ProShares UltraShort Dow30 (DXD) Stop -$3.34 Alert Target = +$5.57 Volatility = 9.5%
Needless to say, these two look a lot like the chart of DOG.
There you have it. Do I recommend loading up on all these short and defensive funds? No, I cannot in good conscience recommend such a drastic shift in portfolio allocation. But then again RSI is suggesting this very strategy.
Have a great Memorial weekend. I’ll catch you after the market closes on Tuesday.
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