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Wednesday, June 3, 2009

Skeptical of this Last Move Higher

On Monday markets rocketed higher, breaking out of their recent trading ranges to close above their 200 day EMAs (green lines). There are a few reasons to view this last move higher with some skepticism:

1) Volume wasn't really confidence inspiring, staying relatively low.

2) There was no Major Accumulation Day around the actual break out.

3) The market is extremely overbought with 88.82% of all stocks already above their 50 day moving averages, suggesting there isn't much room left to fuel this move.

4) The market is extremely overbought as measure by the RSI, suggesting there isn't much room left to fuel this move.

5) Volatility (VIX) has stopped falling, and looks to be 'basing'. This may fore shadow a decline in risky assets in the very near future.

6) The Record High Percent Index (RHNYA) sits in nose bleed territory at 95.65. Moves over 90 tend to be short lived spikes that are resolved when equities drop...

7) Financials have been lagging, not confirming this last break out as mentioned here.

8) Transports (TRAN) have not confirmed the recent price highs. Old school, hardcore Dow Theory insists that the transports must confirm. Non-confirmation is a sign of weakness.

9) Yields have been rising... and rapidly. This is not equity friendly. At all.


Anonymous said...

The DJIA is going into the 9K range. It may even touch 10K.


Carlosula said...

I'm with you. Great analysis! I try checking your site as often as I can. You're succinct, back up your conclusions, and say it in point form.
When I see unemployment numbers, and what the market is doing these last weeks, it just doesn't all make sense.

Dave Narby said...

@ Anonymous

I agree.

But first it needs to get down around 6000. 9000 will come late Summer.

Then the real cliff diving will begin...

@ Ben

Great analysis as usual.

Anonymous said...

""88.82% of all stocks already above their 50 day moving averages". Is that number very different from the recovery in previous recessions (early 1980s and 1990s)?

fajensen said...

Rumors are that Latvia is close to a devaluation / default - This will make a nice crater in the balance sheets of the major Swedish banks, tanking the Swedish Krona and the stockexchange too. The rest of the Balkans will be dragged into the mess also.


Anonymous said...


So the Dow will crash 3,000 points and then soar 3,000 points, all in 2 months?

Um, okay, sounds plausible.........

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