FLS Update: Mr. Market Breaks Major Support & The Bearish Case For Stocks… 11/01/2016

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Market Update:

Notwithstanding more easy money from global central banks, the stock market is forming a huge top and continues getting weaker, not stronger. Keep in mind, every bull market in history has a definitive beginning and a definitive end. This bull market began in early 2009 and is getting “old” by any normal measure. That means, we are getting closer to the end of this stubborn bull and closer to the next bear market. 
 
The Bearish Case For Stocks: Central Banks Are Less Dovish
One can easily argue that easy money from global central banks was the primary driver of this entire bull market. Now, central banks are becoming less dovish. Over the past 24 hours alone we have seen 3 major central banks (Japan, Australia and Canada) conclude their latest meeting without announcing more easy money measures. Meanwhile, the Federal Reserve wants to raise rates. The less dovish stance from global central banks continues to hurt the market. 
 

Waning Leadership: 

Fewer and fewer areas of the market are in strong technical shape. Additionally, more and more sectors and big market leaders are breaking down. Apple (AAPL), Amazon (AMZN), AliBaba (BABA), Alphabet (GOOGL), Applied Materials (AMAT) and several other leaders are below their respective 50 DMA lines and fewer and fewer areas are acting well. We know, in the short term, the market is “oversold” and testing major support (see attached charts). But until the technical damage is repaired, a strong defensive stance is warranted. 
 
 

FLS Portfolio:

The FLS portfolio sold AAPL earlier today for a small loss of -3.56%. I created FLS to empower investors to make better investment decisions – in both Bull and Bear markets. The Russell 2000 hasn’t moved since Jan 2014, the benchmark S&P 500 is at the same place it was in Feb 2015 and the other major indices are treading water. Eventually, a clean trend will emerge (up or down) and when it does we will be ready. Until then, knowing not to take on more risk is just as important as knowing when to be involved. Here’s a snapshot of the FLS portfolio as of this writing (2:57pm EST),
 
A. The service owns: SMH +14.65%,
B. The service will exit: SMH @ 65.96,
 
 

Working Orders:

There are no working orders today
 
 
 

Disclaimer: 
This analysis contains information from resources believed to be reliable but are not guaranteed as to accuracy or wholeness as of the date of this publication. Past performance is not necessarily indicative of future results. There is always a risk of loss in trading and investing. Opinions articulated are subject to change without notice. This analysis and any opinions expressed are intended for educational purposes only and should NOT BE interpreted as a call for engagement in any transaction involving the purchase or sale of any security or investment product or service. The risk of loss in investing and or trading can be substantial, and traders/investors should carefully consider the inherent risks of such an investment in light of their financial condition. The author, firm, associates, or the firm’s clients may have a position in any of the investments mentioned and their positions are subject to change without notice.  Any reproduction or retransmission of any portion of this report without the express written consent of Sarhan Capital is strictly prohibited.

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