Brazil Stocks Heat Up
The market slowly moved higher once again yesterday. The indices actually started deep in the green. But a midmorning ride down to 1220 resulted in consolidation for the rest of the day. The SPX rose nearly a percent after it surpassed 1220 resistance but it couldn't hold onto those gains. SPX quickly retraced the morning jolt and then declined by another percent near the close after 1220 could not be held by the bulls.
Between 1220 and 1250 there is not much resistance, but at 1220 there is plenty of selling pressure. Although if SPX is able to take out 1220 it could be a fast ride to 1250, maybe briefly higher to 1260 or something in that area.
But as I mentioned in great detail Tuesday, for a variety of reasons I find it hard to believe that the wounds inflicted by the bears earlier this month have fully healed. And I do not think the market is ready to blast beyond 1250.
In light of such beliefs, I decided to add bearish exposure to the TradeMaster portfolio yesterday morning. In fact, those positions were taken near the highs of the morning.
The two positions TradeMaster added to the portfolio were shorts. The first short position in was taken after it displayed struggles taking out $60 resistance. So long as shares stay below $60 there is a great chance they tag $50. The second short trade yesterday was having similar troubles taking back $32 resistance, and shares could see $27. And do investors respect rating agencies anymore?
Click here to find out what our two short trades were and our remaining long position.
In addition to our short positions, Beacon Roofing Supply (NASDAQ:BECN), our Hurricane Irene trade, paid. Shares were within a half of a percent of my target price yesterday morning, and slid close to 4% after that top. Our Hurricane Irene trade, BECN, was only intended to be a quick investment, and 6.5% return in a few days was a good gain.
The Asian indices popped following big gains in the U.S. and better than expected Chinese manufacturing data. Although the bears were back in Europe this morning as disappointing manufacturing data from the U.K. and eurozone resulted in modest selling pressure. Much of the blame for the poor data was placed on decreased spending by governments due to tightened fiscal policy.
With the U.S. indices in need of a pull back and SPX at 1220 resistance I don't expect much positive action today. Only a blow-out ISM number this morning will provide the U.S. indices with big gains today. And since U.S. "official" unemployment numbers will be released by the government tomorrow morning, I find it doubtful investors place big bets ahead of it.
One area of the market that could provide cheap stocks is Brazil. The market in Brazil has sold hard for a year, but the government cut rates this morning to boost the economy. Watch stocks like Petroleo Brasileiro (NYSE:PBR), Gafisa (NYSE:GFA) or Gol Linhas Aereas Inteligentes (NYSE:GOL) for potential bullish trades this week.
