This is it. This is what it looks like at the end. This is what happens at the end of a broad bull run lasting close to five years. This is what we have all feared, the end of the good times. The just throw a line or two into the market and watch it land a winner. Well it is over. And what do we get in its place? Have a look at the chart below. It is the 10 day average of the advancing stocks minus the declining stocks.
This is telling me the same thing as the new high charts I posted last week. We are just not running hard anymore. The rallies on the indexes are looking good only because of a couple of big Caps. Have a look at the highs I have marked at A, B and C. What they have in common is that they were set after a meltdown. They were oversold rallies and very powerful ones but that has been it. No follow through at all. Every rally after that high has been weaker and weaker until we get another meltdown. And then the pattern starts again. In a healthy market after a rally into overbought territory from oversold condition you would expect the market to roll over, work off the overbought condition by putting in a lower low then retesting the first rally reading if not pushing to new highs. But as you can see with the sloping trend lines we are just getting lower highs. All the time the XAO/XJO is pushing to new highs. This is negative divergence. Big time. The 20% odd return this year is bullshit. BHP, CBA, WOW and friends are confusing you if you think we are still in a ripping bull run. Less and less are participating in this run. If you are a index trader you don't have to give a toss but if you are a stock picker your job is getting harder. The current pattern is of course not finished playing out. As we need to retest the meltdown lows with another one without putting a high reading up around 150 for this pattern to hold but so far this rally is still confined to a select few participants. Far too few for me to change my mind about the call that we are heading into a stop start, zig zag market. As for todays little disappointment plunge we will see a couple of days out whether that is it for now but I'm still thinking a good run up to X-mas is yet to play out. It may just start a bit lower from here.
Thankyou. I agree with you completely. I value your insight.
Posted by: Charlie | December 13, 2007 at 05:07 PM
Nice read this one :)
Posted by: Andrew | April 05, 2009 at 04:04 PM