The bulls claimed victory on Tuesday because the markets held their own and closed around the break even point as the chart from MarketWatch shows. These days it seems to take very little to keep the bulls happy.
However, Fed chief Bernanke’s saber rattling about inflation and potentially higher interest rates boosted the dollar but caused other markets to decline. Heading south more sharply than the above closing figures indicate were Emerging and Latin American Markets along with Gold, Technology and the Commodity Index.
Our Trend Tacking Indexes (TTIs) declined as well and are hugging their long-term trend lines as follows:
Domestic TTI: +0.16%
International TTI: -5.59%
Domestically, we are approaching a sell signal, barely 30 days after receiving the Buy on 5/15/08. If this sell comes to pass, it will definitely qualify as a whip-saw signal. I will clarify my exact exit strategy tomorrow as there seems to be some confusion based on several readers’ emails I received.
Comments 1
Ulli,
THought yu might want to read this one lifted from another email service I get.
Quite simply, the 1980-2002 bull market trendline was violated; the importance of which can’t be underestimated. The last time a trendline of this magnitude was violated, the S&P; fell roughly -27% from the breakdown level. If that were to occur once again – then it would argue for a lower target of 985 from its current 1360 level. This has significant implications towards tactical trading to be sure. Moreover, confirming this major breakdown, the 20-month moving average was violated and is now turning lower – a circumstance last seen at the end of 2001. We all know the subsequent damage done thereafter.
Therefore, taking the long-term perspective and perhaps positing that last Thursday’s rally was in essence the end of the countertrend rally off the March lows, while Friday’s plunge the beginning of the next leg lower – one should certainly consider becoming more defensive and/or putting on short positions.