U.S. Stocks Nosedive: What Markets (If Any) Are Safe Right Now?

Jun.30.10 | About: ProShares UltraShort (SDS)

Today, US stocks were not successful in issuing a counterpunch to yesterday's bloodbath, when there were 11 stocks down for every 1 up. Stocks staged a meager rally after opening - only to swoon late and close at new lows for 2010.

As you can see from the chart below, the S&P 500 peaked in late April. Since then, it's formed a series of "lower highs, and lower lows" - in the meantime, wiping out all of stocks' gains for 2010, and then some.

S&P 500 Price Chart 2010 To DateA downtrend for stocks since April has wiped out all of the S&P's gains for 2010...and more. (Source: StockCharts.com)

With stocks at lows for 2010, you probably want to be out of equities for now - or, if you're feeling frisky, you could also short some dogs, or the S&P 500 itself.

Is there a "safe place" to park your money? Not really.

Commodities have rolled over - as has China, which actually topped all the way last year!

The US dollar is still in an uptrend, it appears. Though everyone on the planet seems to agree that "cash is trash" - the timing of when the composting completes is still up for debate. The dollar looks destined to take out it's previous highs from the last market downturn:

US Dollar Chart 2010 To DateNot a bad performance from a pile of trash. (Source: StockCharts.com)

It is, though, perhaps a bit of a non-confirmation that the dollar is not hitting new highs in tandem with the stock market hitting new lows. "Dollar up, stocks down" was the playbook from 2008, and it's followed pretty closely until the last month.

We may just be seeing a normal pullback in the dollar rally. I recall seeing 95+% dollar bulls somewhat recently, so there may have been nobody left to buy the dollar in the short term. So until further notice, the "All The Same Markets" story of dollar up, everything else down, should remain as a steady guide for us.

But what about gold? It's tough to argue with this chart year-to-date:

Gold Price Chart to Date 2010Gold's "one way" rise through the 1st half of 2010. (Source:StockCharts.com)

The only bearish thing I've heard recently about gold was Robert Prechter's interview on the Financial Sense Newshour, where he cited 95+% gold bulls as a reason that he believed we would see a better price to "go long" the barbaric relic.

In 2008, remember, gold actually turned down after stocks were already in an established downtrend. Could that be the case again? Perhaps.

Long story short - gold is holding up extremely well, as is the dollar. Everything else is getting hammered.

Other than that - as far as "safe stocks" are concerned - I'm not sure there are too many. On a day like yesterday, when there are 11 down for every 1 up, most portfolios are going to get clobbered. You could do OK by making sure you are in the stocks that are going up on slaughter days like yesterday - but it's probably best to put a stop-loss nearby.



Disclosure: Short the S&P 500 via SDS and September E-Mini Futures Contract