The next few days can still be volatile because the market is overbought, but the ECB announcement on Thursday will pull the market higher in anticipation. Maybe it will also offer a good opportunity to sell before the employment report.
Monday, April 29, 2013
April 29 - update
The attempt to turn lower at the end of last week is failing. The market is strong and it will most probably make new highs before a correction starts.
Wednesday, April 24, 2013
April 24 - it's time for another leg down
The deceleration in retail sales has continued since I last wrote about it.
Meanwhile, the stock market has been consolidating near its highs. It is time for it to play catch up.
Especially as the daily chart has become committed to the upside yesterday by closing strong and above a visible inflection point on the chart and also above the monthly resistance level at 1576.
Meanwhile, the stock market has been consolidating near its highs. It is time for it to play catch up.
Especially as the daily chart has become committed to the upside yesterday by closing strong and above a visible inflection point on the chart and also above the monthly resistance level at 1576.
Thursday, April 18, 2013
April 18, 2013 - Covered short at 1541
The market still looks weak but it could start a bounce from the 50 DMA.
Thursday, April 11, 2013
April 11, 2013 - I got short at 1584.75
I had left a sell order overnight. The rally to new highs is weak and this bull leg should be over.
The market has already surged and settled above the 2007 high so the risk is minimal. I will hold on to this position even if the market does not sell off right away.
April 13 - Update: Everybody seems to be expecting a correction (see here and here). So, I think the market is close to a top but may reach 1600 on the S&P500 first. I will hold my position even if this happens, as I think the correction will reach at least the 1500 level.
The market has already surged and settled above the 2007 high so the risk is minimal. I will hold on to this position even if the market does not sell off right away.
April 13 - Update: Everybody seems to be expecting a correction (see here and here). So, I think the market is close to a top but may reach 1600 on the S&P500 first. I will hold my position even if this happens, as I think the correction will reach at least the 1500 level.
Saturday, April 6, 2013
April 6, 2013 - slowdown confirmed, gold to bounce
The employment data that came on Friday generally confirms the slowdown I talked about in my previous post.
Here is a chart of a short term rate of change in employment. The series has further to fall.
From another point of view, this slowdown in employment may very well have marked the top for this recovery. Here is a yearly percent change in private payrolls (excluding health & education payrolls which are not cyclical).
The top is already in place from last year. In previous cases the series continued its fall.
During the previous bull it had topped in April 2006 and the market followed only more than a year after. This is why this bull market, even if quite old, has further to go.
Meanwhile, the price of gold has reached the bottom of a long trading range.
As I wrote in my previous post about gold, its price is rising in anticipation of economic weakness, and falls when the economy accelerates. I have anticipated the economic slowdown, but gold continued to fall. This may suggest further weakness this year.
But until then, gold is at important support and is a short term buy as it bounces during the correction in the stock market. Then, the time will come for another leg down as the correction on the monthly chart could be bigger than 20%.
Here is a chart of a short term rate of change in employment. The series has further to fall.
From another point of view, this slowdown in employment may very well have marked the top for this recovery. Here is a yearly percent change in private payrolls (excluding health & education payrolls which are not cyclical).
The top is already in place from last year. In previous cases the series continued its fall.
During the previous bull it had topped in April 2006 and the market followed only more than a year after. This is why this bull market, even if quite old, has further to go.
Meanwhile, the price of gold has reached the bottom of a long trading range.
As I wrote in my previous post about gold, its price is rising in anticipation of economic weakness, and falls when the economy accelerates. I have anticipated the economic slowdown, but gold continued to fall. This may suggest further weakness this year.
But until then, gold is at important support and is a short term buy as it bounces during the correction in the stock market. Then, the time will come for another leg down as the correction on the monthly chart could be bigger than 20%.
Tuesday, April 2, 2013
April 2, 2013 - correction just around the corner
It's been a nice 18% run, but it's over. The market is up against strong resistance and the short term breadth is awful. Such a pessimist tone is not appropriate because the bull is not over, but, still, a 7-10% correction is just around the corner.
I drew resistance on the monthly chart above. There were many other important levels that did not manage to shake the market for more than a few days, but this is the ultimate level - the high from 2007. The market will most probably rise and close above this level and then turn lower in the following days.
Here is an indicator of breadth that shows important divergence - the 13d ema of TRIN.
The weakness of this indicator has been disregarded by the market in the recent past. In fact, I was expecting a larger correction based on this indicator in my previous post. The big difference now is that the market has already risen by 18% and it is making record highs.
There are also some economic indicators that are sensitive to intermediate term fluctuations in economic activity. These are quite correlated to the market and they are suggesting a slowdown.
Here is the 3 month average of the New Orders vs.Inventories ratio,
the US PMI, which has turned lower recently,
the pace of change in Retail Sales, also turned lower,
and the pace of change in Employment (private payrolls)
Over the long term the bull is still alive. Employment in the US has been doing constantly ok and this should fuel the expansion at least until the end of the year. Overseas, The Chinese PMI has started to rise strongly and even the European economy is at the beginning of an acceleration phase.
Here is the Business Cycle Clock from Eurostat, showing the European Economic Sentiment Index (ESI), an indicator that leads economic activity and even the markets.
Thus, a correction that stays within the parameters of a bull market is a buy. It will probably reach the 1420-50 zone, but this level is just a wild guess for now.
I drew resistance on the monthly chart above. There were many other important levels that did not manage to shake the market for more than a few days, but this is the ultimate level - the high from 2007. The market will most probably rise and close above this level and then turn lower in the following days.
Here is an indicator of breadth that shows important divergence - the 13d ema of TRIN.
The weakness of this indicator has been disregarded by the market in the recent past. In fact, I was expecting a larger correction based on this indicator in my previous post. The big difference now is that the market has already risen by 18% and it is making record highs.
There are also some economic indicators that are sensitive to intermediate term fluctuations in economic activity. These are quite correlated to the market and they are suggesting a slowdown.
Here is the 3 month average of the New Orders vs.Inventories ratio,
the US PMI, which has turned lower recently,
the pace of change in Retail Sales, also turned lower,
and the pace of change in Employment (private payrolls)
Over the long term the bull is still alive. Employment in the US has been doing constantly ok and this should fuel the expansion at least until the end of the year. Overseas, The Chinese PMI has started to rise strongly and even the European economy is at the beginning of an acceleration phase.
Here is the Business Cycle Clock from Eurostat, showing the European Economic Sentiment Index (ESI), an indicator that leads economic activity and even the markets.
Thus, a correction that stays within the parameters of a bull market is a buy. It will probably reach the 1420-50 zone, but this level is just a wild guess for now.
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