Bearish Signs Abound

The Vix is finding support near previous tops in the high 30’s. The RSI fails to fall below the 40 area and stay there, indicating it’s still in a bullish trading range, which typically is in the 40-80 range. On the flip side, a bearish trading range would be 20-60. The ADX has been slowly moving lower and gearing up for a big move in one direction or the other. Given that the overall trend is bullish, it’s a good bet that it’s going to continue in that direction. This will be bad for the overall markets.

Internally we are overbought and getting rejected right at resistance, when you’re looking at the number of stocks on the Nasdaq that are over their 50 day MA. Yes, we can still continue higher, but the odds are definitely against it at this point. A 35% run up on the Nasdaq is about all any good bull can hope to get over the last month.

Bulls and bears make money, but pigs get slaughtered.

Comments

[TheFounder:]

Yes. The bear market rally seems to be over. I sold my longs a bit too soon but hey, no one can guess the top.

Apr 28 09:00 AM

[Mad Hedge F...:]

How about this one. There is something wrong with this picture. The Chinese stock market is shouting at us that the bull market is back, while the price of crude is telling us in more surreptitious tones that this is a bear market rally that will fail. If we were in a true economic recovery, crude would have run back up to the $70-$90 range by now. Who is right? Certainly large scale Chinese buying of economically sensitive commodities like crude and copper has been the hallmark this seven week move in global equity markets, which have brought a welcome $7 trillion boost in valuations. But how much of the move has been mere short covering? What is the extent of the dead can bounce? Until a recovery in corporate earnings signals the “all clear” we could be stuck in a trading range here, possibly until the end of the year, and maybe for years. “Sell in May and go away” is looking better by the day. Sell a few short dated calls above the market against your long positions. Pass the sunscreen?

Apr 28 01:55 PM

[kelm:]

The Shanghai market and Chinese buying of basic materials says that China may be into a new bull market. The Chinese domestic economy is going to surprise everyone this year I think. Yes, exports are still very important to them but they have come farther than most realize in developing the domestic demand. Oil is not higher because we do not have a global revival in economic growth. The decoupling that was absent on the way down I believe will start becoming apparent on the way back up. I base these comments on anecdotes that I am hearing from business people who are in or have recently been to China (and not just to the coast) as well as to the rise in exports recently noted from certain Asian nations (Singapore as an example) to China. Those 1.3 billion people are doing more than waiting for new orders from Walmart.


On Apr 28 01:55 PM Mad Hedge Fund Trader wrote:

> How about this one. There is something wrong with this picture.
> The Chinese stock market is shouting at us that the bull market is
> back, while the price of crude is telling us in more surreptitious
> tones that this is a bear market rally that will fail. If we were
> in a true economic recovery, crude would have run back up to the
> $70-$90 range by now. Who is right? Certainly large scale Chinese
> buying of economically sensitive commodities like crude and copper
> has been the hallmark this seven week move in global equity markets,
> which have brought a welcome $7 trillion boost in valuations. But
> how much of the move has been mere short covering? What is the extent
> of the dead can bounce? Until a recovery in corporate earnings signals
> the “all clear” we could be stuck in a trading range here, possibly
> until the end of the year, and maybe for years. “Sell in May and
> go away” is looking better by the day. Sell a few short dated calls
> above the market against your long positions. Pass the sunscreen?
>

Apr 29 10:25 AM

[JGL:]

The Chinese were buying copper and now gold not because of economic rebound but for poltiical and startegic reasons. For me the Chinese market is not a real indicator due to its lack of transparency. Nevertheless I am still hoping for a pullback to get in (FXI)....

Apr 29 11:17 AM

[Subhankar:]

Those who aren't convinced that Asian markets have entered bull phases should take a look at the index charts of Taiwan (TSEC) and Korea (KOSPI). That doesn't mean that this unidirectional global rally will not pause or correct. But Asia may be recovering a lot faster than Europe and USA. The indices are reflecting that.

Apr 30 11:30 PM