That is my favorite clip from Seinfeld that I often use with Members to illustrate BS market moves. I’m pretty good at spotting fake market moves. As George says in the clip: “I know, I can tell – it’s one of my powers.” Fortunately, we are now able to get a visual clue as to what’s real and what’s FAKE by zooming out to the bigger picture and keeping an eye on our charts.
While yesterday’s gains may have seemed exciting, they were actually nothing more than the EXPECTED bounces off our resistance levels – bounces we had predicted back in April, at the same time we predicted the 5% pull-back in the first place. That kept us from buying the dips yesterday, as consolidating near the bottom of our FIRST 5% drop is no reason to go on a buying spree.
Even worse, as I said yesterday about the bounce we were expecting: “Of course, if they accomplish this by knocking the Dollar back below 76, then it will be meaningless.” Well, meaningless it was as the Dollar finished the day exactly on the 76 line and, this morning at 6:30, they took it all the way down to 75.60 but the market is, as I pointed out on May 4th – “still too heavy!”
There’s still time to sell in May and go away, Randall Forsyth writes. Although stocks are off 3% in the month, top technicians see further correction ahead. While the S&P fell through its 50-day moving average, it remains far above its 200-day moving average, a sign the broad market is extended, according to John Mendelson, the esteemed veteran technical analyst. Mendelson likens the stock market to a stretched rubber band in a presentation to ISI clients — just as it was in April 2010 before the S&P retreated 16%.
Meanwhile, the market’s leadership has narrowed while the major averages made marginal highs. The number of new highs has declined steadily while the market’s erstwhile leaders like AAPL, FCX and DE all topped out weeks ago. This is “classic stuff,” Mendelson says, pointing to “serious negative divergences” in the stock market. Another warning sign has been the poor relative strength of financial stocks, which has lagged the market for a while. While financials have long ago ceded the market’s leadership, “you do…
