Traders Edge 7-20-12- Down she goes....

The equity markets here in the U.S. are set to open lower, following a disappointing top-line growth at General Electric (although noting that earnings did beat estimates) and world markets that were generally lower.

As we stated yesterday, we increased our short-exposure, believing that the market were showing distribution at/near resistance levels.We also believe that the market will, at least, consolidate into $132 (on the SPY) and depending on sentiment may close the gap below $130. The SPY was up nearly 30bps yesterday on 129 million shares and is pushing into the May 4 downtrend with 193 million shares. This suggests the market will fail, technically speaking.

Fundamentally, we continue to believe that anemic economic growth and a lack of monetary stimulus are headwinds to further market appreciation.

For illustrative purposes we also show the price charts of the Russell 2000 Ishares ETF (ticker IWN) and the Powershares QQQ trust (ticker QQQ).

The ETF's on both the indices are showing the same technical characteristics as the SPY. The IWN was down nearly 50 bps yesterday on 49 million shares, after running into the May 3rd downtrend of 75 million shares. As for the QQQ, the ETF was up a nice 1.1%, most likely on the back of strong performance out of the tech space, including QCOM and EBAY. That said, the volume of on the Q's of 53 million compares to the May 4th downtrend of 107 million shares. The Q's are also at the 61.8% fib retracement level and may be setting up for decline into $53 level, which is the start of the most recent rally.

Our portfolios continue to have large exposure to coal stocks, some shipping names, a large cash position, precious metals and precious metal stocks, and our increased short exposure. We may add to the short exposure in the near future.