The Tycoon Report

BEWARE: June Stock Market CRASH! Here's Why ...

Tuesday, May 26, 2009 | Chris Rowe

The easiest profits of your LIFE!

That's what this market is about to offer you.

Don't even blink when I give you the nod.  Don't even ask for a second opinion.  When your spouse asks you "What's wrong?" ... when your kids say, "What's wrong with Daddy or Mommy?" ... when your boss asks where you're going -- keep the horse blinders on and just zone out and make your way to the computer (or phone).  

Get access to your trading account and get ready to grind out MORE profits -- instead of giving back what you've recouped over the last two months.  When you get the signal, lighten up on bullish positions, and initiate your bearish trades and GET PAID!

Get Ready ...

This is not hype or sales pitch.  It's a FACT.  The market could very easily -- and probably will -- (what every investor would have considered, by historical standards) crash!

When we managed money on Wall Street through the '90s and halfway through the 2000s, this is the kind of market we would lick our chops over!

When the market starts to sell off, the very best the bulls can hope for is a 13% sell-off.  That would be a mere 50% retracement of the last two-month advance.

What's more likely is at least a swift 20%-22% sell-off. That would be a test of recent (March) lows on the S&P 500.  We'll only know how real the last two months of gains have been when we witness the force of the next sell-off.

There are so many things pointing to a sharp sell-off in the very near term future, it's amazing.  The only thing -- the very last signal I need to see before becoming an aggressive bear -- is a weakening of the internal market. 

Market internals have been strong.  But everything else says to look out below.  And you don't have to sit there, holding the bag, hoping we don't break the March lows. 

And that's very possible, too, so that means a decline of more than 22% is not what I'd call unlikely. 

Forget 'Sell in May and Go Away'

I'm telling members of my trading service, The Trend Rider, much more detail than what I'm about to tell you about this market's weakness. But think about the following:

1. Seasonality.  We have entered the weaker half of the year.  Typically, the market sells off in May.  Why haven't we seen that this May?  Well, we crashed so hard recently, that we had what's called a "dead-cat bounce."  Even when a dead cat falls from such heights, at such speed, it's bound to bounce. 

When there is so much scared cash on the sidelines, there is bound to be a strong bounce. 

2. The reality of the latest advance.  Was it huge demand?  Perhaps.  But it's not as strong as you might think.  Think about how much short-covering we just witnessed. 

When investors short-sell stock to profit form a decline, they have to close out their positions by buying back stock -- thus adding to the upward pressure you've just witnessed. 

And short-sellers weren't only taking profits buying back stock, they were also getting HAMMERED and buying back stock -- closing out losses -- because of their bad timing! 

It's the same idea as why even smart investors kept buying at the top when the top was so obvious.  Flip it around.  Pessimism was so strong recently that, even though investors saw signs that the market would have an intermediate recovery, they sold short at the wrong time. 

Many did so after seeing the 2002-'03 low was broken, and others sold short after only a slight bounce in early March. And when the market just kept ripping higher, they were forced to close out the short positions (by buying back their stock), which added pressure to the manipulated advance!

So, a lot of this buying was short-covering -- not so much bargain-hunting.  That's always how the first bounce in a bear-market bottom happens.  This means there is likely either a re-test of the lows, or lower lows, coming.  We will know how much real demand there is soon.  But there are lots of bearish stories about to hit the tape in the coming months.

You have to know the market is rigged.  That's OK; we can profit from it as long as we see it.  We just went below the 2002-'03 bottom in March.  Institutions pushed it that low, knowing short-sellers would come.  TONS of short-sellers sold stock (to the market manipulators hungry for a bullish trade), and they got their asses handed to them on a plate by a waiter named Pierre who even warned, "Be careful -- zee plate is HOT!" 

Short-sellers buying back stock pushed prices higher, giving the guys who manipulated it below 2002-'03 lows even higher prices to dump more stock at. Stop and ask yourself, are you buying from them right now?

3.  Now the market is way too complacent.  We see that in the Chicago Board Options Exchange's Volatility Index (VIX).  It's lower than it's been since the market was about to get SMASHED in September 2008 (right before the market crashed by about 30% in 30 days and ultimately lost half of its value)!  That means we are seeing the highest level of complacency since then.


4. This was accompanied by a Moving Average Convergence/Divergence (MACD) sell signal (red circle on top chart) and a Relative Strength Index (RSI) sell signal. 

The MACD put the sell signal in after making it to heights not seen since the year-2000 top, or perhaps the high seen in mid-2001.


5. The market is as internally overbought (in the intermediate trend) as it was in July of 2007, when I started recommending that The Trend Rider members start going crazy buying put options on the brokerage firms, including Bear Stearns, Merrill Lynch, Morgan Stanley, and about eight others.  The only difference was that the internal indicators showed supply in control, as opposed to demand being in control right now.

So, don't get me wrong; I'm waiting for the final (internal) shoe to drop.  My Internal Strength System students know what I'm talking about.  But when it drops, this market will drop like a hammer. 

I write for The Tycoon Report on Tuesdays.  I hope I can get to you in time when "D-day" arrives. (What if it arrives on a Wednesday?  Then it will be a whole week before I can get to Tycoon Report readers.)  But you can feel free to get started with my trading service, The Trend Rider, by visiting this link now, and you will get much more than what you see here.  As a Trend Rider member, you'll get trade alerts with exact instructions on when and where to enter or exit positions.

Currently I have a couple of bullish positions open at The Trend Rider, but I have more bearish positions than bullish ones. And a couple of weeks ago, I closed out a bunch of bullish positions with decent gains.  (I knew it was better to be safe than sorry.) 

19.28% -- 3 weeks
16.67% -- 4 weeks
41.80% -- 8 weeks
5.67%  --  9 weeks

Normally I wouldn't have exited so aggressively when demand was clearly in control.  But with the powerful sellers out there and the powerful long-term trend (declining) intact, it's better to just chill out and see what happens.  And now, I'm just seeing more and more reasons to get the bearish guns out, and get ready to kick some assets.  Don't be the one watching this market and wondering how low the next leg will be. 

I've told you many times before how to hedge, how to get aggressively bearish, and how to spot the trends that will tell you when that time is.  You can buy deep in-the-money puts on the weakest sectors (weak sectors you can find at The Trend Rider or Sector Hunter). 

You can buy deep in-the-money puts on the S&P 500 just like I told you to do one year ago ALMOST TO THE DAY (May 27, 2008), which went on to gain about 80% in five weeks after I told you to hedge with them.  That was in my article "Why This Week Could Pulverize Your Portfolio!" (Read that article here to get an idea of how to take a bearish position in the S&P 500 WHEN THE TIME IS RIGHT.)

Keep reading The Tycoon Report, especially when I write on Tuesdays.  You won't want to miss updates.  I'll tell you whether (and when) that final shoe drops.  And unlike last year's free gift, I won't be guiding you out of any bearish positions.  But I will be telling you when it looks like the bleeding has stopped and why.

As of now, I'm not ready to be the aggressive bear that I'm preparing to be.  But my positioning has already begun.  And when I see my signals, members of my options trading service will know right away.  And then on the coming Tuesday in the Tycoon Report, I'll let YOU know. 

Let's make another HUGE profit from this next bloodbath.  You want to make your money back?



“Profit from the Trend”

Chris Rowe
Chief Investment Officer
The Trend Rider