|
PureBytes Links
Trading Reference Links
|
I don't doubt anything you said here Earl but I do doubt a large drop
based on the history of the markets in November and December and the
strength of the economy along with falling fuel prices. PE's are at
pretty reasonable levels and there are many stocks under-valued at this
point. So, the question becomes, do the technicals drive the
fundamentals or is it the other way around? Time will tell. I
don't expect a huge change before the end of the year either way and it
continues to be a stock pickers market.
Bob
At 07:20 AM 11/17/2005 -0700, you wrote:
My
work is throwing off some serious warnings. Attached are screen shots of
my NYSE and NASDAQ breadth models. The most serious divergences are in
the new Hi-Lo model (upper right) where we have a 5 month series of lower
highs even as price has been rallying. I give A/D volume (lower right) a
lot more weight than A/D issues (lower left). NYSE A/D volume broke out
above previous pivots highs (green horizontal line) on 10/31 and NASDAQ
11/2 nicely confirming the rally. Subsequently we have had lower highs
even as price has posted higher highs.
Turning to risk measures, I keep an eye
on the spreads between treasury and corporate and treasury and high
yield. Widening spreads are giving warning of a negative change in
investor willingness to take on risk. Confirming this is the behavior of
VIX which broke out of the declining channel on 10/7. While this rally
has brought a nice decline in VIX (investors willing to accept more risk)
the decline has not come close to the lows established in July.
Maintaining and expanding P/E's depends upon investors being willing to
accept increasing levels of risk. There is now a significant divergence
giving us warning that investors are less willing to accept
risk.
Lastly, I include a weekly chart of the
NYSE which shows a very clear rising wedge pattern. Rising (and falling)
wedge patterns are generally terminal to the trend. W/O 10/7 gave the
first warning when the shorter (blue) lower trendline was broken and
confirmed on 10/14 when the longer (gray) lower trendline was broken. We
would generally expect a retest of the trendlines. We have gotten that
test with price rallying back into the longer wedge on 11/4. A failure
which fails can be a very good reversal signal so the question at hand is
this rally back into the wedge a sign of a new bull leg? The internals
discussed above suggest that it is not.
Earl
SPONSORED LINKS
Business
finance uk
Business
finance course
Business
finance online course
Business
finance class
Small
business finance
Business
finance schools
YAHOO! GROUPS LINKS
YAHOO! GROUPS LINKS
|