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Tom Guttenberger
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  • Market Leadership and Directional Speculation 0 comments
    Nov 21, 2010 11:12 AM | about stocks: IFN, PGJ, SPY

    In a past article I wrote about the possible divergences of markets.  My expectation of banks underperforming, and leadership by growing emerging markets has largely come to fruition.

    The story stays the same but the directional spin is different at this moment in time.  The hottest markets in world have taken a breather, and these charts are among the most dangerous looking.  See the IFN, PGJ for Indian and Chinese references.

    The performances of India and China have lead the way and their markets are consistently destroying old 52 week highs as the SPY has attempted to do the same.  But now, I would argue that these charts have broken support levels and are only foreshadowing greater losses in the short term for equities globally. 

    Well documented are the debt issues of Greece and Ireland.  Also cynicism about QE2 is running rampant.  All of these are very real, tangible issues.  But as a trader I argue NONE of this matters.  The fact is economists and traders alike have been aware of these issues and their consequences for many months.  It is known by all, so therefore, it shoud count the same as being a non-fact, a non-factor.

    What matters is perception.  Charts effect perception.

    With this weeks major sell-off, I have searched for sanity in the face of calamity.  I have found none.  I would expect to see stonger more stable performance from the IFN and PGJ if we were to continue higher, but these look like broken charts.  Calling tops and bottoms is difficult, but I honeslty believe you need to start analysis with the leaders or laggards for respective bull and bear markets.  This is why I would be extermely tentative in any long position at the moment.  If the swing trade on the fundamentally best markets have broken down, hope seems dim for the markets propelled by optimism and ~0% GDP growth.

    I am currently Beta negative, and the recent price action seems remarkably similar to the days preceding the flash crash.  I urge all to trade with caution.

    Disclosure: No positions

    Disclosure: No Positions

    Disclosure: No Positions

    Stocks: IFN, PGJ, SPY
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