Tuesday, August 2, 2011

Time to start trading again?? NOT SO FAST!!

To all my followers.... Stay out of equities for now, we have not hit the bottom yet.

The U.S. is still very much in danger of having its credit downgraded by one or more of the rating agencies. In not so many words, the measure that was passed today is PATHETIC. It does not address any of the problem children on the expense side of the U.S. government's income statement, such as MEDICARE, MEDICAID, or SOCIAL SECURITY. It is these entitlement programs that are racking up the charges on the U.S. governments "credit card", and these were the items least addressed in the proposal that passed today. What does this mean?

The picture is still very bleak for the U.S. economy and it's future. There will be an unemployment report out on Friday and be ready for some not so comforting numbers. The S&P still has at least 200 more points to drop before I would recommend broad purchasing of equities.

The indexes have pretty much been following their 200 day MA's right now, but for the most part are teetering over the edge of a cliff. A string of bad news, i.e. US downgrade, weak spending data, and weak unemployment data, could cause a breach downwards through that 200 day MA causing a "technical breakdown" in the markets.

Conclusion: Buy AFTER the breakdown, not before it.

Keep those trigger fingers at bay for now.

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