Advisor Jerry Slusiewicz of Pacific Financial Planners urges investors and traders to use caution in the current market, and to set stops on their trades. He shares his view of the market’s technicals in light of macro events, and discusses some stocks that are outperforming.
Kate Stalter: Today, I’m happy to have a repeat guest joining us, Jerry Slusiewicz. Jerry, you and I were talking before I began the recording here, about some of this whipsaw action that’s back in the market, that’s just been making it really difficult for retail investors to feel confident about coming back in. Tell us what you’re seeing out there these days.
Jerry Slusiewicz: Yeah, Kate thanks for having me. It’s not tough only on the retail investors. It’s tough on the professional investors, as well, to really formulate a solid opinion about which direction to go, because of the whipsaws that we’ve been seeing.
Coming into the year, I was very bullish. I know that a lot of people weren’t, because of what happened in the fall and the debt downgrade for the US, and things like that. But it did seem like things were getting better, and then the LTRO in Europe, that long-term refinance operation of their bonds, kind of band-aided their banks for a while.
And I knew we’d have a nice run, and when that kind of wore off, we started getting very defensive before the pullback and through the pullback. But now it’s a matter of: Are we going to have a recovery, or is there another leg down?
So, Kate, the only thing I see is to kind of set parameters in terms of when you would sell or when you would add more. And I do think that the markets are giving us some pretty clear levels of where that would be.
Kate Stalter: In terms of some support and resistance levels that we’re seeing lately?
Jerry Slusiewicz: Correct. If you use the S&P 500, the low went right below the 200-day moving average on June 4. We hit a low of 1,266 and we have what looks to be forming an inverted head and shoulders on that, with the left bottom shoulder of 1,291, and we closed today at 1,314.
So, I think we could go down to around the 200-day moving average, which is around 1,290, 1,291, right where that left shoulder is, and form a right shoulder. And then, if we could break above 1,336, that’s going to be good, and I think that we’d have a good fall.
That was originally my premise coming into the year, that we’d have a good start, then we’d hit that May, June, July period, and it would be a little bit more difficult. But heading into the election, those who want to get reelected are going to do all they can to make things look good, heading into the election.
But don’t let people tell you that, “Hey, because it’s an election year, things always look good.” I got to tell you: 2008 and the year 2000, two of the last three elections, the market didn’t look good at all, heading into the election. So while, historically over 100 years, it might be true, two of the last three haven’t been that good.
But those are kind of the parameters I’m using. If we drop below 1,265 or 1,260, I would, sincerely, move into a cash position or certainly more defensive than I even am. And above 1,336, we’ll get more invested than we are today on the S&P, because those are the parameters we’re in. Anything other than that, you can get chopped up in a sideways trading range.
If we do go on for just a few more weeks, there have been, historically, a couple of bottoms in early July, over the last couple, three years. In fact, the timing is about right, and I’m obviously hopeful that this does actually break to the upside versus the downside. That’s what I really want to see happen.
Kate Stalter: Putting it into historical perspective, August 2011 is obviously very fresh in people’s minds. Are you still seeing some concern about what might play out this summer in that regard?
Jerry Slusiewicz: There is a tremendous amount of risk out there. I think even more so than last year, because of not only the US debt downgrade that eventually happened—you know there is talk here in the US that what they saw August 1, 2011, with the extension of the debt ceiling, was that we might run out of money before the election.
You know, it was supposed to be January 2013, but I’ve heard a couple different things that come October, that might have to revisit that debt-ceiling issue one more time. If that happens before the election, all bets are off, Kate, and we’d have problems.
But looking at Europe, what we see going on over there in places like Greece, with the election coming this weekend, and Spain and Italy with their high interest rates to finance their debt, that is a microcosm of what I think is heading in our direction, and how long it takes to get here is just a matter of debate.
There are a high number of risks: the tax cuts that end the beginning of 2013. The markets supposedly look forward. It will see that coming, so you’re right, there’s a lot of things that can happen in the fall. So, it’s very important to have an exit strategy on every single position, and have those points figured out in advance, where you would sell, even if it means taking a small loss.