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 Strategies & Market Trends : Technical analysis for shorts & longs

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To: Johnny Canuck who wrote (47856)5/2/2012 12:18:48 PM
From: Johnny Canuck2 Recommendations  Read Replies (1) of 49820
 


Technical and Seasonal Sell Signals Are in Place: Hirsch



By Jeff Macke


Now that the Dow Jones Industrial Average ( ^DJI) is back to 52-week highs, it's a great time to take profits or even think about getting short some stock, according to Jeff Hirsch, president and editor-in-chief of the Stock Trader's Almanac. In part one of Breakout's conversation with Hirsch, he discusses the "Sell in May, Go Away" rule of thumb. Taking it one step further, Hirsch sees enough suffering ahead to suggest trying on some shorts. "The run from October until now has confirmed the seasonal trend view," offers Hirsch in the attached video. In addition, he sees an economic picture taking shape that includes the rolling over of a complicated technical formation called " Three Peaks and a Domed House."

If that's not enough, a momentum indicator known as the MACD gave Hirsch a sell signal back on April 3. All of which is a lot of technical jargon boiling down to his belief that it's time to take the other side of the rally by going bearish.

"One of our new favorites is the Adviser Shares Active Bear Fund ( HDGE) exchange traded fund," says Hirsch. "They use pretty active timing methods, shorting mid and small cap stocks."

Such a technique typically leads to more pronounced movements than the underlying market in both up and down tapes. (Hirsch discloses that he has long HDGE shares and has a "collegial" relationship with the fund manager.)

Hirsch has a dim view of "everything with a ticker," with exception of the above ETF and a couple of bond plays. He's "parking money" in iShares Barclays 7—10 year Treasury Bond Fund ( IEF), as well as the popular iShares Barclays 20 year Treasury Bond ETF ( TLT).

They're aggressive strategies ill-suited to those inclined to ride out the storm. If you're a gunslinger—or at least someone not opposed to incurring some fees in an attempt to capture the 10—15% move Hirsch sees coming—he thinks betting against small caps and parking in bonds is the short-term play of choice.
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