Market Signal: Proceed with Caution 10 comments
The Correct Call
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The market appears to be stuck in neutral. Our momentum models are posting buy signals while our leadership models are reading sell.
According to our technical analysis, the charts paint a clearer picture. If we don’t make a move up right about now, we could have some selling pressure. As you will see on the chart below, all 3 of the major indexes are at the cusp of delivering a sell signal.
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This article has 10 comments:
1. The quieting of the price action after a severe beating is a good sign
2. The formation of a falling channel consolidation after a sharp drop is
a bad sign. These typically break in the direction from whence the initial
move came (down).
3. The fact that the market has stopped diving on really bad news is a good
sign.
4. The pattern of the 3 rallies within the falling channel formed since late
September hasn't made the change needed to break the channel to the
upside. Each rally has been with withering buy volume, and each rally
has been less sharp leaning more each time to the horizontal - a really
bad sign.
5. The Accumulation/Distribut... strength of this latest rally is notably better
than the previous attempts at the 50 dma - a very good sign.
6. The fact that most expert opinions you hear are bullish on 2009 and the
Russell Money Manager Survey has fund managers at 72% positive on
the new year is a bad sign. This does not indicate a despairing bottom.
Back in December 2007, this survey stood at 76% bullish and only 15%
bearish on 2008. This is a very bad sign.
7. Few seem to fully appreciate the destabilizing debt unwind. Fund
delevering is just a small part of this. In the 2000-2002 bear market, it
provided most of the dynamite (just a mild recession and the rest of Debt
World doing just fine, inviting the start of the housing boom, in fact). But
now, even more fund debt is being reinforced with all the rest of Debt
World unwinding in unison. A Bernstein Co. survey of funds concluded
that fund deleveraging is "only half complete" Barron's 12/15 and they
estimate that about $40 billion was yanked in the October move and that
another $200 billion will be unwound as of a November 21 report to clients.
The $200 billion would be another 3 or 4 Octobers. This is a very bad sign.
8. The central banks are providing unprecedented infusions. That's good.
So which way is going to be the next big move? I absolutely, positively can say without equivocation that I do not know. You can, however, divide the pros
and cons into two camps:
1. Debt money flow and technicals in the one camp, and
2. Opinion/government meddling in the other.
The technicals that aren't bearish are sentiment related (A/D money flow, stable price action). So you have something of a standoff between the debt money flow and geometry signs pointing to lower bottoms, and the opinion and proactive government positive vibes. I wouldn't bet too heavily on either side right now.
Please stop talking about it as if it was inhuman.
it is a derivative of human behaviour, INCLUDING the block trading programs written by humans.
if we all didn't log in to our trading desks tomorrow and we stopped the trading programs, NOTHING WOULD TRADE. try that with sunshine.
so HUMANS are behaving tensely and nervously, with not enough fear or greed pressure to push things right now. if anything, it's bear fear causing short buying.
until we get another quarter of numbers from businesses and consumers, we're treading or staying in a band.
Man, what would we do without such insight?
According to Dr. Martin J. Pring in his classical book "Technical Analysis", the years ending in a decade are usually, historically speaking, weak for the stock markets. For instance, 1929-30 the Great Depression; 1959-60 onset of a recession; 1969-70 severe recession; 1979-80 Iran Crisis and recession; 1989-90 stage set for the S&L Crisis; 1999-2000 stage set for the Dot.com Bubble.
And so it would seem particularly troubling to me that we are now entering the 2009-2010 end of the decade even a year ahead in a somewhat ominous manner. Hope everything will work out this time.
Best to all for a Happy and Prosperous New Year!
> The only signal that I use is the pundits. Last year most of the
> pundits were bullish and we know what happened. Now most of these
> goof balls are bearish, I say time to buy some equities...
so what part of " the Russell Money Manager Survey has fund managers at 72% positive on the new year" didn't you understand? ... and I can't name two sectors with the wind at our back.
1. August 2 and 27
2. September 21 and 25
3. October 20 and 29
4. November 24 and December 22
Then looking at the S&P 500 chart, you see that each of these pairs was right in front of a market dive, ideal short points. This would suggest that a dive is imminent. It also agrees with the prevalent sentiment you hear about the direction being up to start the new year and the fact that prevalent sentiment is usually wrong.
But sentiment is actually right now and then, and it agrees with some technicals, so we are in a dry-powder zone.