The Bear is growling 9/30/11

Let me point out that my chart on SPY gave an exit signal on long and my 401K monthly system has had me in cash, bond funds and Fidelity Government Income funds for a while now and this has kept me out of recent troubles. I hear the bear growling. When I look at stock charts I am amazed at some of the drops I see. IR has dropped from a peak of 51 to 31. Solar technology has been decimated. The ETF TAN has gone from a 2011 peak of 9 to 3.4. HRS after failing to rise above its previous high did a double top at 52 and is now sitting at 35.Remember my blog on HRS where I said that I would buy HRS only if it crossed its previous high and broke out?  JCI did the same and was turned down and double topped at 43 and is now at 27. And I think there is another leg down coming. Energy has been heading down as the dollar has been strengthening and ANR dropped from 68 to 18.  The pristine DJ30 stocks have held up well under the circumstances but even they have been feeling the heat. Look at CAT which dropped from its 116 peak to 77 this year. And the financial sector has been hit with Europe’s woes and the inability to shed itself of the mortgage foreclosure problems in the US. Look at the gold standard in financials in the US, Goldman Sachs GS, dropping from 175 to 95. And we don't need to talk of BAC or C.

My sense is that many individual stocks have dropped much worse than the large index funds and while the market reports the big indexes like the Dow Jones 30, many individual portfolios have been hurt badly already. The broad indexes have been in a trading range for the last few months and been bouncing off a support. We are very close to that support again and my gut tells me that support will eventually fail to hold. The global fundamentals are just too weak and any solutions in Europe and US are all temporary. We have to face pain ahead; but not in my portfolio if I can avoid it.

I was looking at a scan I do in TC2007 which says “Climbers with Volume”. This scan idea came from “Lady Climber” who was knighted by the Worden Bros in TC quite a few years back. You have to know the TC and Worden Bros system that used to knight letter contributors to know what I am saying but that system is also unfortunately gone... Lady Climber funded her kid’s education by buying these stocks that were Climbers and she showed us the scan she used to pick those stocks. Here is what my version of that scan shows. There were only 13 (unlucky 13) stocks that showed up on the scan today. 10 of them were bear funds! The remaining 3 were stocks like Goodrich GR which was recently purchased at a high price and is now unlikely to move at all. In the currency markets UUP – the US dollar has been showing some upward trajectory.

I have run for the hills. There is a chance that support will hold and we will see a surge back up. If that happens, I will certainly look to jump on that bandwagon. Meanwhile we are still in one of those bear flag sideways movements and the eventual next leg will be…. no one really knows but quite possibly down. Why risk my capital while the bear growls? I will take some small bear positions if there is a breakdown. In any case, I am glad I am sitting out for now. I don’t have to get mauled by the bear, regardless of what some of those Wall street brains want me to think.