Think about what happened today. A huge surge in buying hit markets today as others used those buy orders to sell out and book profits so that it formed a bearish long upper shadow on the daily chart.

SPX stock chart

Looking at a 5 minute chart of the S&P 500 today, you can see the heavy selling after the buy-side volume surge.

SPX 5 minute stock chart

Institutional traders and hedge funds are selling into the upward moves and they won’t stop. This heavy selling into upward moves has been going on for 5 weeks now.

Sell Signal On the 1 Hour Chart

For swing trading, my favorite chart is the 1 hour chart of the S&P 500 with 13 and 30 hour moving averages.

SPX 1 hour chart

The 13 hour crossed below the 30 hour MA. That’s the bearish sell signal I said to look for on this week’s Saturday Show.

Moving Into Bond Funds

I moved money back into defensive intermediate term bonds today by buying USIBX.

USIBX chart

USIBX has a confirmed Parabolic SAR buy signal.

The logic for increasing one’s exposure to bonds goes like this. USIBX and other intermediate term bond funds have an annual yield of 3.9% paid out monthly. The S&P 500 is up 1.8% in 2018 with just 6 weeks to go until the end of the year. The risk versus reward doesn’t make sense for equities versus bonds. It’s much smarter and safer to hold bonds than it is to risk everything holding stocks when the S&P 500 is up only 1.8% for the year!

There’s still hope the S&P 500 can go higher if we get a higher low above the October 29, 2018, low. However, the biggest danger in a market like this is to be too quick on the entry and to go long in a downtrending market. It is much better to be late on the entry than it is to be early.

Oil Plunges, That’s Bad

The price of oil has gone into a bear market.

Price of oil

That’s bad. Perma-bulls say lower oil is like a tax cut. Perma-bulls are stupid. Don’t buy it. We saw what happened back in 2016. Cheaper oil translates into about $30 a month in savings for the average consumer. Oil dropped all the way down to $26 in February 2016 and it didn’t create a massive surge in consumer spending. What the lower price of oil does do is cause shale drillers to shut down drilling rigs as it becomes less profitable to drill. The decrease in rigs means layoffs and the loss of good paying jobs. Those job losses negatively impact the local economies near drilling sites and a negative ripple expands outward through the economy.

Disclosure: I’m long USIBX.

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