Tuesday, December 01, 2009

My "out there" prediction: Q's hit $40.5 by Xmas

Yeah I know, the dow jones hit a new high for the year today and bearish predictions are not so popular when the dow is making news highs. But what about the market leading small caps? Despite all the falling dollar market euphoria, the Russell 2000 (small caps) again failed to retake it's 50 dma. Even the S&P was unable to reach a new high and still lies well below the recent gravestone doji. Looking at the Nasdaq 100 (above), I see a series of lower highs in place now leading up to today's new gravestone doji. Take a look at what happened to AAPL today(below). After being up most of the session it got slammed in the final hours of the day to close down $3 out of the blue. I think everyone knows this market has gotten far, far ahead of itself and has turned into a momentum game of musical chairs. Jittery investors are hitting the sell button at any hint of weakness, like with AAPL today.
While these charts are not overwhelmingly bearish, by any means, this market just feels like it wants to sell off to me. I haven't taken a significantly bearish position in a while, but I'm going to stick my neck out here and bet on a big drop in December. I'm looking for the Nasdaq 100 to break its 50 dma and hit $40.50 this month.

Disclosure: I am short BIDU and own SPY puts, for now.


stock news said...

Indian market is likely to extend two-day gains on the back of strong global cues. The Nifty futures traded as SGX CNX Nifty Index Futures in Singapore were up 19 points 5150. Strong global markets and robust auto and cement sales figures coupled with strong September quarter GDP data is likely to boost confidence.

According to data released by the NSE, in the last session, FIIs were buyers of index futures to the tune of Rs 975.8 crore while sold index options worth Rs 18.72 crore. They were net buyers of stock futures to the tune of Rs 348.34 crore and bought stock options worth Rs 21.58 crore.

More details http://www.16anna.com

The Average Jay said...

I think you are going to be right.