Follow Up on WMT and VZ and General Commentary

I wanted to follow up on a few stocks that I had given some detailed technical analysis on in prior posts. First I had mentioned that Wal*Mart (WMT) was forming a long-term top and should be on the short-seller's watchlist. This past week, the stock made a huge gap down on the highest volume in about 4 years. This gap took the stock from above the 50 day moving average to several percent below it and broke the uptrendline of the rising wedge pattern since October's low. In this instance it is unlikely the stock will make a significant retracement of the gap down and could/should be sold short immediately with a stop loss of no more than 7% from the entry price.

I had also given a detailed analysis of Verizon (VZ) as it was approaching major overhead supply and testing the 200 day moving average during this bear market rally. That stock has not clearly broken down yet, but all the signs of breaking down are there except major price confirmation and a high volume close below the 50 day moving average. Short-sellers could use 31.00 as a "sell stop" order to enter a short position this week with a stop no higher than 34.45.

On a general market note, I made put option purchases on NEM (gold stock) and QQQQ (Nasdaq ETF) this past week. A major sell recommendation could be made this week, with the VIX being the primary entry signal. This is my next planned trade for this blog, and will be of a longer term nature than previous trades.

From the many types of data I follow, and from a market logic standpoint, I feel the stage is set for a huge market decline in coming months. My general assessment of financial news and public opinion toward the stock market at this time is that, either the bear market is over, or the worst is behind us. If I had to pick one phrase to sum up the attitude I believe to be present, it is "Things have come down so much, why sell now?" Unfortunately, a thorough study of market history will tell you that this is not the attitude at major market bottoms. The attitude at bottoms tends to be shear panic, followed on a longer term basis by disillusionment and disinterest in stocks before major bull markets begin.

While I don't value market opinions without a basis in history and statistical analysis, I believe the above opinion is well supported by available data and study of market history. All I can say is that from my veiwpoint, extreme caution is warranted for investors holding stocks right now.
For investors that want to hold stocks long-term, please quickly look into intelligent hedging strategies through inverse ETFs or put option purchases with expiration 3 to 6 months from now.

Pete