The Nasdaq did climb back to 2750, then fell steeply on last Friday. We have been warning for an imminent downturn, as indicated on the charts.
This could well be the start of a multi-month slide. We have come a long way since last August, but we need to remember that markets never go up in straight line.
The S&P touched the 1300 level, then turned down. The uptrend is still intact, so there is room for some rebound this week. But the upcoming bearish period is likely to take the S&P down in February, and break the uptrend that has been in place since last August. In this week, 1270 area acts as the key support. Any fall below 1270 would confirm this scenario. Then the first target would become 1180.
Despite an overbought market condition, rising oil prices, and Middle East governments in chaos, stocks rallied to new highs. The threats to the political stability of Egypt, Jordan, Yemen and even Saudi Arabia were ignored as investors focused instead on an improving U.S. economy.
Despite the DJIA crossing 12000 and S&P 500 breaching 1300 this week, Many indices in the U.S., as well as globally have failed to follow the DJIA and S&P 500 over the last week, and I see this as a major warning that a pullback or correction is near. In addition to the non-confirmations by many indices, I am also seeing plenty of divergences with respect to market internal data. At the same time, price momentum is overbought on a daily and weekly basis, and market sentiment is at extremely bullish camp. This, to me, all adds up to a 5% to 10% decline in the major indices over the next month or two.
With the exception of very quick bullish trades, I suggest extreme caution. When this market turns south, there will not be enough room to provide those seeking the exits.
No comments:
Post a Comment