Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is Santa Claus Dead, Will the Stock Market Tumble?

Stock-Markets / Stock Markets 2010 Nov 25, 2010 - 05:20 PM GMT

By: Bob_Clark

Stock-Markets Best Financial Markets Analysis ArticleThe wall of worry is about as steep as it gets. The weight of evidence points to a top in the market. Here are a few of the negatives that are stacking up like cord wood.


1) Investors intelligence suggests complacency among public investors and the gurus they listen to, are at extremes last seen at the highs in 2007.
2) The Baltic dry index keeps falling, suggesting that products and materials are not moving by ship, or at least the cost to lease the ships is falling, indicating a lack of demand. I have posted the latest Baltic index on my blog.
3) Mutual fund cash is at record lows, indicating that most funds are already in the market. 
4)General Motors came to market, usually the timing of big IPOs have an eerie way of marking market tops. 
5) The put/call ratio imbalance that showed that a large number of puts had been sold in October has been worked off.  The puts were sold by the Fat Boys and bought by the public, but I believe most expired in November. The public has not purchased new puts, so now they have exposure to downward movement.  I have posted the latest put/call ratios in my blog.
6) China is stepping on the brakes.
7) Interest rates have been going up on the longer term debt instruments. Putting the housing market in peril.  Prices are falling and so are sales.
8) My proprietary sentiment indicator is as bearish as I have seen it. 
 
Those are just a few and I haven't even touched on Europe and the exploding piigs.
 

 
  Meanwhile, the Inflationists and Deflationishs are squabbling over who has made the poorer calls and missed the most moves.  That seems to happen whenever the market starts going sideways.  The reason is that getting the fundamentals right, does not mean you will get the market direction right.
 
I wrote a Market Oracle article back in October, entitled QE2 Stock market warning, what if nothing happens? May I suggest that if you have not read it yet, that you do so before reading this. At that time everyone was certain that the markets were going to the moon.  In the article I suggested that nothing was going to happen because the public were buying puts as insurance and the Fat Boys were selling them. At the same time the FBs were going short. I suggested a spike to new highs followed by a pullback into the 3rd week of November was likely.
 
That is what has happened.  Now we see the puts expired worthless and the Fat Boys are back knocking at the door, looking to cover their shorts.

We have a nasty looking head and shoulders top forming as well.  The public and small funds are teetering on the precipice of another sell off.  The tone of the media has turned more bearish and they are already trotting out the perma bears . This time there is no signs of traders buying protection against a market  decline.  
 
Fat Boys win again.
Below is a chart of the S&P futures for December, it mirrors the S&P 500.  It graphically shows how we reached the point we are at now. We have formed a head and shoulders top pattern because of the dynamics created when the public loaded up on puts last month to try and beat the Fat Boys.  You can't beat the Fat Boys, all you can do is join them. The put options all expired worthless and the FBs kept the premium. Now price has fallen back to where the public bought their stock, so no profits there either. This time the public is not buying insurance. On top of that, they are loaded long and are totally exposed.
 

 
In the longer term chart below, I have highlighted the above area in red to put things in perspective. The situation looks dire and one has to wonder what will keep the market up.

Interestingly we find ourselves in the same situation as we did 1 year ago. We have made or are about to make a trading cycle low (green arrow). I say have, or are about to, because cycles are unreliable and they can shift, for now I have it logged as coming at the end of October.  We are coming to the end of the month and we are pressing down and squeezing the breakout buyers like we did last year. There is a difference however, notice that last year we didn't come back as far into the previous low. Coming too far back is never a good sign.
 

 
Here's the thing.
Look what happened when we topped out the rally in early 2010.  Due to cyclicality, we fell back into February.
If we top out and start to fall now, we should fall all the way into February again and it won't be pretty. My point is that it is too early to start down into the next cycle low.
 
Even with the horrible fundamentals that I highlighted earlier.  Even with the ugly chart pattern. We have to be open to a solid year end rally occurring again this year.
 
Why?
There are two fundamental reasons. 
First of all, we know Bernanke and co. want to see higher asset prices. They probably don't want a stock market plunge putting a damper on our Christmas spirit and purse strings either.
 
Secondly, there are a lot of Christmas bonuses tied to fund performance at year end.  If you are the Fat Boys, why not let the funds buy the price up into a strong, year ending close. Sell to them, then kick the stool out from under them early next year. They make easy victims. 
 
There is one fly in the ointment, the market usually doesn't do the same thing twice in a row.  That ominous head and shoulders pattern that we see in so many markets, including gold, may be sending the right signal after all.  Trouble is, when it is obvious, it usually doesn't happen.
 
Lets face it, the Fat Boys can kill this overbought market in a heartbeat if they choose to. Maybe they will, but for now, against all odds, I still believe in Santa Claus.
 
The markets are manipulated by an elite few. I call them the Fat Boys. If you don't know their methods, you will always be struggling. I offer training in how they work. Please visit my site for more information on how to work with them. If you are not with them, you are a victim. 

Bob Clark is a professional trader with over twenty years experience, he also provides real time online trading instruction, publishes a daily email trading advisory and maintains a web blog at www.winningtradingtactics.blogspot.com  his email is linesbot@gmail.com.

© 2010 Copyright Bob Clark - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
 


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in