Market Analysis
We have been in a down trend since 03/07/05. On 05/09/05 we started what I think could be another down leg on this consolidation.
We are seeing contrarian action in the market, oil prices and interest rates are DECREASING and the market is going DOWN at the same time.
An improving economy generally means inflation and higher interest rates. This will hurt financials and interest rate sensitive equities. Especially the SP500 and Small Cap RUT.
Since Apr 15th the SOX, NDX and Nasdaq have headed North. Biotech, Pharma, Healthcare and Semis have given support.
Since May 10th everything else that has been supporting the market in its uplegs (utilities, transports, oil, gas, cyclicals, natural gas and gold) is headed South in an accelerated fashion.
This is called divergence and causes split tape days. We think bonds, semi's and tech have caught a bid as institutional investors sector rotate into the only thing they can with OPM (other peoples money).
If you still believe that the SOX is the tail that wags the dog, the divergence of the tech sector could be signalling an end to the overall consolidation. However, TECH has been a laggard since the most recent Santa Claus rally.
Its possible that small investors are being led into a major bull trap being set in a beaten down tech sector that logically has no near term upside; and a bond market that is having its last blow out party.
If the tech divergence is a PUMP and DUMP head fake by the institutional investors, when they DUMP, gravity takes effect and the shit runs downhill.
With the uphill legs gone, this market could shatter this years lows and then go down to last years lows.
Pay attention to the broader SP500, NYSE (NYA) Wilshire 5000 (TMWX) and AMEX Major (XMI) these will indicate the broader market action.
Also watch the MID and RUT, as these indices will confirm the broader markets actions.
As for the bond party, it will end in Aug/Sept, when the RMB goes to a sliding 5% bandwidth, the 30 year bond announcement is made, the underlying growth currents surface in the mainstream and the FED keeps on raising rates.
Ignore at your own risk.
We are seeing contrarian action in the market, oil prices and interest rates are DECREASING and the market is going DOWN at the same time.
An improving economy generally means inflation and higher interest rates. This will hurt financials and interest rate sensitive equities. Especially the SP500 and Small Cap RUT.
Since Apr 15th the SOX, NDX and Nasdaq have headed North. Biotech, Pharma, Healthcare and Semis have given support.
Since May 10th everything else that has been supporting the market in its uplegs (utilities, transports, oil, gas, cyclicals, natural gas and gold) is headed South in an accelerated fashion.
This is called divergence and causes split tape days. We think bonds, semi's and tech have caught a bid as institutional investors sector rotate into the only thing they can with OPM (other peoples money).
If you still believe that the SOX is the tail that wags the dog, the divergence of the tech sector could be signalling an end to the overall consolidation. However, TECH has been a laggard since the most recent Santa Claus rally.
Its possible that small investors are being led into a major bull trap being set in a beaten down tech sector that logically has no near term upside; and a bond market that is having its last blow out party.
If the tech divergence is a PUMP and DUMP head fake by the institutional investors, when they DUMP, gravity takes effect and the shit runs downhill.
With the uphill legs gone, this market could shatter this years lows and then go down to last years lows.
Pay attention to the broader SP500, NYSE (NYA) Wilshire 5000 (TMWX) and AMEX Major (XMI) these will indicate the broader market action.
Also watch the MID and RUT, as these indices will confirm the broader markets actions.
As for the bond party, it will end in Aug/Sept, when the RMB goes to a sliding 5% bandwidth, the 30 year bond announcement is made, the underlying growth currents surface in the mainstream and the FED keeps on raising rates.
Ignore at your own risk.
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