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May 16, 2011 3:38 PM ETBIDU, AAPL, BKNG, GOOG, NFLX1 Comment
Joshua Hayes profile picture
Joshua Hayes's Blog
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I posted this on Friday:

Before I go into the reasons, once again, why I believe we are near a major market top, let me first say that since new longs are not working you might want to either avoid them or keep them very small. Especially junk like IMAX where the most recent EPS and sales numbers are quite pathetic compared to same Q YOY. I want to go over all the various points as to why I believe we are near a major market top following the March 2009 FTD that launched this thing to begin with. So here are all the problems I see that clearly indicate to me the top is near. Remember, I did this back in 2000 and 2007. Back then, the bulls fought me to the death on my position. In 2000 it was people in NYC. In 2007 it was readers of Realmoney.com. Today I don’t really have that problem as I have divorced myself from stock market chatter outside this website. However, I am sure if I hit the forums, chat rooms, and websites out there in the “interweb,” I would get attacked. Here are the reasons we are topping: We are two years into an uptrend (not fresh). The major market leading stocks like BIDU AAPL PCLN GOOG are all coming under distribution and have very shady chart patterns. The only leader holding up still is NFLX and the chart is loaded with distribution the past year and lower volume rallies. The Nasdaq and SP 500 have a bunch of distribution days since February while the rallies continue to lack real follow-through or accumulation. Defensive sectors like metals, drugs, medical, diversified services, retail, health services, leisure, chemicals, and financial services have taken the lead from the growth sectors like cloud computing and other leading technology industries during 2011. The rally from September 2010 to November was fun and very profitable because most of the players were not bullish and believed we were topping (before the September 1, 2010 follow through day, bears passed bulls in the Investors Intelligence survey registering almost 40% bears to 30% bulls. Today, despite the warning signs in leading stocks and distribution in the indexes, there are 51% bulls to 18% bears (most newsletter writers are still bullish). Gold, silver, and oil are showing massive heavy volume breakdowns in their ETFs–GLD SLV OIL–while the UUP (the Dollar) appears to have bottomed on very heavy volume. Inflation seemed to be driving the market higher and now it appears the Dollar is back in vogue. QE2 is coming to an end and it will be some time before the inevitable QE3 starts. I have not personally made any money in the stock market since January being down 20% from my account highs and lagging the market by over 15% since December (something that doesn’t happen unless something big is about to happen). The biggest tell for me, since we have such a high win/loss ratio during uptrends, is the fact that during this latest phase of the uptrend all we seem to do is cut losses lately (longs are not working). This is why I believe this summer is going to be a capital preservation period that will allow us to have more money to work with when things do get better. Soon it’s going to be time for me to be working the short side.

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