3 REASONS THE S&P HAS PEAKED FOR THE YEAR
Bloomberg recently interviewed the chief technician of Bay Crest Partner’s, Christian Bendixen and the firm is now saying the S&P may have already peaked in 2010. Their primary concern is something that has been an ominous sign for several weeks now – the conviction high volume selling and low volume lack of conviction on buying days.
According the Bay Crest the selling in 2010 has a markedly different tone than the weak, often low volume sell-offs that took place during the 2009 run-up. Bendixen elaborates:
[the selling is] “much more impulsive, much more powerful on the downside. High volume on down days and low volume on up days is a sign of distribution that we’re going to head significantly lower.”
While the technicals worry Bay Crest they say the market isn’t just broken from a technical perspective. Bay Crest says the fundamentals are now broken as well. The low risks of sovereign debt, continued stimulus and the U.S. housing market recovery have all been flipped on their heads this year:
“All the assumptions made in 2009, fundamentally, are up in the air right now.”
Specifically, in terms of the technical outlook, Bay Crest sees three reasons why the market could have already peaked for the year. The combination of low volume, multi-month declines and a broken rising wedge (see chart below) has them convinced that the market could decline substantially from its peak and won’t make a new high all year.
Yes I completely agree. I am convinced that market has already topped out.Everybody is optimistic and bullish. People are feeling a lots of remorse on lack of participation in the ongoing bull market.These are the typical signs of topping out.
An assessment as to where the markets are headed is simply like an individual looking into the crystal ball. It has its own determination and anyone can prognosticate but knowing is not the prognosticator’s capability. Like market timers as another example, one can only get admission into the ballpark. Then you become a spectator and observe the event.
This report is based on 2 factors. -
1) That Buying Volume is low and Selling Volume is high. Hardly surprising since we are in the first meaningful correction since 9th March ‘09. Profit taking must be the order of the day. The only certainty is that market factors are dynamic. What’s to say that that we won’t see another run up from here accompanied by big volume. By the time we wait to see that big buy volume … wouldn’t it be kinda like missing the boat?
2)Poor Economic Factors – Since when have the Financial Markets ever been led by the Economic Factors? If this were the case, it would be so much easier for everyone to trade the markets profitably. Would a scenario of the Financials moving up again and then Economic Factors slowly thawing one by one be so impossible? After all that is literally what happens every recovery from a major down turn.
It seems that people thinking the market will plunge again always point to the fact that ‘everyone’ is expecting a Bull Market, as if they are some sort of enlightened contrarian. From all the reports like this one I see and the media commentary it seems to be just the opposite. All the ‘Experts’ and Retail Investors following them seem to be very Bearish. Since the Great Depresion, when did the stock market ever do a Bona Fide double dip from an initial recovery from such a major Bear? The Tech Bubble Burst with extreme over values even after the collapse almost went there, but even then didn’t quite make it. Doesn’t every Bear we ever had give birth to an even Bigger Bull … always? Haven’t we just had the biggest Bear Run in the history of the Stocks since the Great Depression. And aren’t we still a long way off the previous high?
All those Bad Fundamentals connected to the US debt and Bad Credit is still ever present and will come back to bite us in the rear and hard, I’m sure. But maybe that will be the next down cycle, after this natural up cycle has done it’s thing.
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