Market Outlook: Bulls Losing Momentum?

A few indicators that I follow are starting to crack and look to be heading back down to the March lows. If these indicators are telling us anything it’s that the market’s character is starting to change and the bulls are losing momentum. There is a lot of room to fall here and I wouldn’t want to be heavily long at this point (click to enlarge).

Comments

[SRF4REAL:]

Down to March lows? I would consider that to be an extreme view. Sure a pullback is in order and all signs indicate such, but the only catalyst capable in my opinion of returning to that drastic an undervaluation would be the SEC's continued inaction in re-instating the uptick rule, or WW III.

Go ahead and be a bear, though... it's how we get our shares cheap!

Jun 18 08:55 AM

[Pauly B:]

Not sure about the March lows too? My feeling is that fund managers have put a lot of money into the market and don't want to sell it all off unless there is something catastrophic. So much of the bad news has been baked into the cake. Also part of this is summer too this is where we get a little less volatility. Could have 10% correction I give you that. Lot of chart support down there around 8500 and 8000

Jun 18 09:05 AM

[YoYoMama:]

Pauly B - agreed. Next support level is 8400 - 8500. After that, 8000. It's a little premature to be predicting March lows just yet.

Jun 18 09:09 AM

[Ed The Merlin:]

Similar feeling...hope not wishful thinking. Right, where is the up-tick rule fix? Only thing I see right now affecting the market is the Hedge fund regulation, but that might turn out to be good getting rid of all the shorting.

Jun 18 09:21 AM

[Alphameister:]

Modest loss of momentum translates into a crash to new lows? Obviously the wishful thinking of someone who missed the 40% advance.

Jun 18 09:25 AM

[sorgmot:]

The 3P's (pretty pitch persons) on the tube and elsewhere want you to risk your money to their benefit.

You need to worry about the persons all around the world who want to pitch the US$'s they hold out their windows.

They are now and they will continue to in 2009 and 2010.

They will replace US$'s held as reserves with lower taxes, and crude oil, gold, silver, copper, p metals and other standand commodities as their new reserves.

Yes, all long shelf life commodities are really money in disguise.

Good Luck.

A look at current price to earnings ratios of USA companies reveals many numbers in the 20's and 30's for companies whose future growth will be low to slow to no. P/E's should be 10 now due to no growth and high uncertainty.

Price to earnings adjustments could now take the DJIA down to 5000 in October, 2009 and 4000 in March, 2010.

Watch out. Consider these kinds of defensive investments.

Foreign companies. Commodities. Foreign currencies.


.

Jun 18 09:57 AM

[Former Exec:]

The market is way over bought....Foreclosures are at an all time high, unemployment continues to creep towards 10%, major bankruptcies are announced weekly, gas prices are increasing rapidly, and now inflation has crept into the game. I see a major correction. The current market was pumped up by the feds and now they are running out of money. Best of luck to all the bulls as I hope I am wrong.

Jun 18 09:59 AM

[Larry House:]

We can argue numbers about how much correction, etc., but it makes sense to be very cautious here. Does anyone really beleive the market is about to start a strong push upward? What has fundamentally changed to prompt that?

Jun 18 10:08 AM

[Trend Surfer:]

The trend continues until it ends. As of now, the bear trend is still firmly established. I'd argue and agree with the writer that until a reversal pattern shows and confirms that the 'March 09' low is THE low, the Bear market continues.

The idea that a "10% pullback is reasonable" presumes that we're in a new bull market. The bull market conclusion is premature given that the Bear market has not been established to be ended. Further, tecnical evidence that North American markets has reached bottom have not been established.

If you have clear technical evidence that a bottom has been reached or that we're in a new bull market, please present it!

Jun 18 11:25 AM

[AndrewBaker:]

Yes, even though we're in the summer vacation period and the low volumes enable the powers that be to manipulate the market more easily (using our money, of course), real financial facts may start coming out and show even the most blinkered bull that this market just ain't worth the money it's gone to. It could be a while coming, but there is a big correction due, and I endorse the view: don't be too long and don't forget to sell into any rallies. Fundamentally and technically, this present rally has finished, and in the absence of a retreat, then we'll mostle be stuck with a trading range.

Jun 18 11:31 AM

[Carl Spackler:]

Funny how two months makes everyone amazed that anyone could even call a return to the bottom. Just how confident were you two months ago at S&P 666? Is it unbelievable that we could retest the lows - no! We have two converging trends: (1) a two month up trend and (2) a 18 month downtrend. Has two months of up move removed all that fear so fast? Right now, it seems as though we have two well balanced camps - Bulls and Bears. What that can usually mean is a sideways choppy market until one wins. Until the victor appears, I will keep my money on the sidelines - Never bet against the long term trend. Two months is too short a time for me to disregard the bear argument.

Jun 18 11:56 AM

[thiazole:]

I was really feeling a 10% correction coming after Tuesday's industrial production data, but with the continuing claims data that came out today, (a drop in continued claims by 148,000 in one week seems hugely positive) it might not happen - hard to call. Unless there is some catch to the continued claims data that I'm missing, I feel that the pull on the market is equal in both directions right now.

Jun 18 12:21 PM

[Dave Wrixon:]

I think you can be assured that the next low will be significantly lower than the last. Check out the profiles a few double dips.

Jun 18 04:50 PM

[bartpr:]

just like no one can predict the strength of the up move no one can predict the depth of the correction. on the long view, every 45% market slide in the last 100 years was followed by a 60% retrenchment in the next 250 trading days. i am hanging in there.

Jun 18 07:37 PM

[Jeff Pierce:]

I wasn't suggesting that the market was heading back to March lows, but the indicators above were looking like they were heading back down to the area where there were in March. Obviously the indexes would follow, but even I don't try and predict that far in advance.

Let's start with a healthy 10-15% correction to get rid of some of the froth in the markets.

Jun 18 08:42 PM

[YoYoMama:]

The uptick rule legislation has died on the vine. It's stuck in Committee, where most bills that never see the light of day stop. Not going to happen unless the market tanks again, then Congress may revisit.


On Jun 18 09:21 AM Ed The Merlin wrote:

> Similar feeling...hope not wishful thinking. Right, where is the
> up-tick rule fix? Only thing I see right now affecting the market
> is the Hedge fund regulation, but that might turn out to be good
> getting rid of all the shorting.

Jun 20 07:46 PM