"It's time for traders to sell."
That's the warning master trader Jeff Clark issued in the June 21 Growth Stock Wire. After rallying 100 points over the past two weeks, the S&P 500 was ready for a drop... The McClellan Oscillator – a momentum indicator that shows overbought and oversold conditions – showed stocks were at "extreme overbought levels."
This indicator flashed sell three other times over the past year. And each time, stocks plummeted. The most recent signal was no exception. Since Jeff's warning last week, stocks are down 3%...
In his essay, Jeff wrote…
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Stocks fell immediately following each McClellan Oscillator sell signal. Then they bounced hard and formed a lower high before dropping to a significantly lower level. The S&P 500 lost between 10% and 17% within just a few weeks following each of the three previous sell signals. A similar decline this time around would put a bottom on the S&P 500 somewhere between 1,225 and 1,130. |
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In the days since Jeff issued his warning, the benchmark S&P 500 stock index has dropped more than 40 points. It's down 1.7%-plus (over 23 points) today alone on bad economic news from Europe. And if Jeff's prediction proves correct, we could see it fall another 100 points in the coming weeks. Via his Direct Line blog, Jeff told S&A Short Report subscribers that we'll see a "tremendous buying opportunity" if the S&P 500 reaches around 1,220.
Digest readers know we're not above deriving a little pleasure from the misfortune of others… especially when those "others" are high-ranking government officials or financial sector executives. These people will say anything in the midst of a crisis to assure markets and deflect negative PR...
Remember earlier this month when Emilio Botin, chairman of Spain's biggest bank Banco Santander announced, "There is no financial crisis in Spain"?
Six days later, on June 11, Spanish Prime Minister Mariano Rajoy asked for a 100 billion-euro bailout. And today, only 10 days after that, Spain is back at the table...
"I have the honour to address you in the name of the Government of Spain to make a formal request for financial help for the recapitalisation of Spanish financial institutions that may require it," reads a letter from Luis de Guindos, Spanish economy minister, to Jean-Claude Juncker, head of the European monetary union's finance ministers.
The request comes as the Spanish government today released the results of two independent stress tests on the banking sector. The studies concluded Spanish banks will need between 16 billion and 62 billion euros of new capital. Spain is asking for a 100-billion euro line of credit.
We're certain the actual number needed to bail out Spain's banks will prove to be much higher. And this is just for the Spanish banking system. It doesn't address Italy, Portugal, or any other troubled European nation. Today, for instance, credit-ratings agency Fitch downgraded the debt of island nation Cyprus – a member of the European monetary union – to junk status.
The rest of the market agrees with our assessment of Spain. The IBEX 35, Spain's benchmark index, is down 3.67% today. Banco Santander, the country's largest bank, fell nearly 6%.
The euro is back below $1.25.
The European Union nations will meet on Thursday for a two-day summit to discuss the crisis. That Spain is requesting money so soon before the summit means it's facing an emergency. (As in, the banks would collapse today or tomorrow without the money.) We wouldn't be surprised to see a full-scale bailout materialize at the meeting later this week.
Gold and silver both soared today. A big European bailout would require another round of money printing from the world's central banks... and that would drive up the value of those precious metals. Gold is up more than 1.2% to $1,586 an ounce. Silver's up more than 2% to $27.50 an ounce.
In his February issue of True Wealth, Steve Sjuggerud told readers about his favorite "stealth bull market"...
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The numbers are just crazy... NOBODY is in biotech these days. Meanwhile, biotech stocks have just hit 11-year highs. The shareholder value here is tremendous. We HAVE to get in. The gains can be simply ridiculous. |
Steve liked biotech because the major companies in the sector (like Amgen, Celgene, and Biogene) were buying back loads of stock. And although their shares haven't gone anywhere in over a decade, earnings were soaring. For example, Amgen had grown earnings 365% since its shares peaked in 2000... But shares were lower today than they were 11 years ago.
Steve recommended the iShares Nasdaq Biotechnology Fund (IBB) to play the trend. The exchange-traded fund, which holds shares of more than 100 biotech companies with market caps greater than $200 million, hit a 52-week high yesterday. Readers are currently up more than 11% on this trade... The S&P 500 is flat over the same period.
Amber Lee Mason and Brian hunt discussed the stealth biotech bull market in today's Growth Stock Wire. You can read more about it here.
New 52-week highs (as of 6/22/12): iShares Nasdaq Biotechnology Fund (IBB) and Alico (ALCO).
In today's mailbag... a former GM insider reports what he saw... And another reader describes how he's used our services. Send your notes to feedback@stansberryresearch.com.
"As a former GM level 10P Executive, I noticed 10 years ago the bizarreness of the company's financial dynamics. I soon realized that the monies we lost on each unit, we made up in volume (LOL).
"I left GM 3 years ago to pursue a more diverse and stimulating career. I miss, however, the benefits and perks that were just short of phenomenal. Had it not been for our UAW Brethren, we never would have seen such spoils – as it would have been too embarrassing for the Management Staff to be so many tiers short of their blue collar counterparts.
"I found your article to be accurate and informative. Thanks." – Anonymous
"You cannot fathom how valuable your newsletters have been for me over the past two years. I just recently banked roughly 30% of Franks WPRT and CLNE recos. It seems like everything that comes out of S&A is gold to me. You have increased my investment knowledge tenfold and I am still learning more and more each day. I am invested in Dan's 12% WDDGs and playing the Nat Gas recos of Franks. I am also holding some municipal bonds thanks to Doc and playing options off recos from Steve. I now intend on investing in True Income to benefit from these bonds in Nat Gas. The hits keep coming, and I appreciate that more than you know.
"A fellow colleague of mine and I are looking to open a PE fund based entirely off of what I have learned from your newsletters. We are looking to establish large positions in Nat Gas this exact way you describe. I was also able to open my own brokerage firm in Charlotte, NC that was funded entirely off the additional income your recommendations have provided me. I decided to open my own business based off your article claiming your company was the best investment you have ever owned. I am beginning to see exactly what you mean, my friend." – Paid-up subscriber Nicholas Joy
Regards,
Sean Goldsmith
New York, New York
June 25, 2012
It's time to sell... Spain is back for more... Gold/silver rally... Our favorite stealth bull market...