| Stocks Are Poised For A Tumble: Is Trading Now A Smart Move? |
 |
 |
 |
| Written by Mike Smith |
| Sunday, 29 August 2010 14:50 |
|
Unemployment
Unemployment Underemployment is still over 18%.[1] A massive amount of people on unemployment or working part-time is not going to help retailers, home builders, or banks. With high unemployment here to stay, U.S. states and municipalities will continue to receive lower revenues than their budgets require, and many will be forced to lay off more workers and make more spending cuts.[2][3][4] Governor Schwarzenegger declared a fiscal emergency a short while ago, as California's state budget is a month overdue and currently has a $19 billion shortfall.[5] Real Estate Credit will be not be as easy to come by for those who have suffered foreclosure.[6] As retail sales stabilize or decrease, commercial real estate will continue to lag.[7] Housing is more likely than not to double dip.[8][9] Banks still have not gotten rid of their shadow inventory, and it does not look like there will be another home-buyer tax credit anytime soon.[10] New Taxes Income taxes will increase and new taxes will go into effect at the start of 2011.[11] Higher taxes is yet another impediment to growth. European Debt Crisis Many European countries will cut spending, cut benefits, and lay off workers.[12] This will affect sales for many American companies. Not long ago, debt downgrades hit Portugal and Ireland.[14][15] Moody's Investor Service put Hungary's debt rating under review.[16] The debt rating of Greece is currently at junk status.[17] Why the Plunge Will Happen Sooner Rather Than Later -Even though the death cross is not a particularly useful metric on its own, it is on the minds of those holding. -More reports will show that housing, jobs, and other sectors of the economy are not growing as fast as was expected. These reports will cause more to lose faith. -The massive rally was mainly driven by optimists. Analysts continued to regurgitate that jobs were a lagging indicator and that once numbers started to improve, they would continue to improve and not level off. More and more are beginning to see the writing on the wall. Hope was the primary driver of this rally, and that hope is fading. Disclosure: I own QQQQ puts and SPY puts Sources: 1. sunherald.com/2010/08/05/2385687/us-underemployment-steady-at-184.html 2. suntimes.com/business/2493278,Job-opeings-drop.article 3. abcnews.go.com/Business/wireStory?id=11080365 4. thenewamerican.com/index.php/economy/sectors-mainmenu-46/4017-facing-fiscal-meltdown-municipalities-struggle-with-pensions- 5. news.yahoo.com/s/nm/20100728/pl_nm/us_economy_california 6. dailyfinance.com/story/credit/consumer-credit-plunges-in-may-april-revised-downward/19546497/ 7. voices.washingtonpost.com/political-economy/2010/07/by_ylan_q_mui.html 8. cnbc.com/id/38244093/Home_Sellers_Slashing_Prices_While_Banks_Mow_the_Lawn 9. cnbc.com/id/38239511/US_Home_Buying_Applications_Sink_to_13_Year_Low 10. latimes.com/news/custom/scimedemail/la-me-derelict-homes-20100711,0,6945778.story 11. atr.org/six-months-untilbr-largest-tax-hikes-a5171# 12. huffingtonpost.com/2010/06/29/europes-massive-austerity_n_629062.html 13. finance.yahoo.com/tech-ticker/greece-in-%22death-spiral%22-europe-still-in-deep-deep-trouble-says-niall-ferguson-518977.html;_ylt=Ajo2DUEbiEHW4ZXR3JQ6oo.7YWsA;_ylu=X3oDMTE2aDFyMHY2BHBvcwMxMQRzZWMDdG9wU3RvcmllcwRzbGsDZXVyb3Blc3RpbGxp?tickers=udn,uup,ero,fxe,spy,%5Eftse&sec=topStories&pos=9&asset=&ccode= 14. articles.latimes.com/2010/jul/13/business/la-fi-portugal-20100713 15. marketwatch.com/story/moodys-downgrades-irish-government-debt-2010-07-19 16. reuters.com/article/idUSTRE66M15620100723 17. reuters.com/article/idUSWNA964520100427 DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. The purpose of Options trading now is to present a critical view of the market, while providing a detailed account of my options trading. |