russell ex urp
Interestingly, the S&P is trading right at major "support." I put this support at 1075.
I continue to be awed by the action of two of my studies. My Index of the 15 Most Active Stocks on the NYSE is plunging, having reached at new bear market low of 424 at today's close. This is far below its level of 612 recorded on September 21.
My Big Money Breadth Index broke down badly last week -- and today sinking to a new low for the year. This Index is an advance-decline line of the 10 largest-cap stocks in the S&P 500 and its action is ominously bearish.
The two indexes confirm my opinion that while the majority of investors have been buying the secondary issues, the big money (the important, seasoned money) has been unloading the big-cap and blue-chip stocks. In fact, the big money has been unloading the blue-chip type stocks ever since mid-December (based on my charts).
I use the word support with care, because in a primary bear market support levels tend to be violated with ease. In fact, in primary bear markets support levels act pretty much like a bar of butter supporting a hot knife.
In put it succinctly, a bear market support is an of oxymoron.
Turning to today's market action, I notice one item that is different than what we've seen recently. I guess you've observed that day after day while the Dow was down, the advance-decline ratio was up. But today that situation was reversed for most of the day, and despite the Dow being up a most of the day, the advance-decline ratio was down much of the day. And I'm wondering if this does represent the beginning of the end for the secondary stocks, the stocks that have been rising even as the big-cap stocks have been under steady distribution.
I read a good many advisories (often daily advisories) that remain bullish. These people often refer to indices, studies and ratio which have worked well over the years. And at this juncture, many of these advisories are frustrated, almost angry, because the market is not responding to their "bullish" studies.
I think the problem can be expressed in one sentence. In a bear market your techniques and methods are not going to work they way they did in a bull market -- in fact, they are very apt to malfunction.
The reason they will malfunction, and I've written about this before, is that in a bear market the bears are right. For instance, in a bear market I ignore the short interest figures. In a bull market there's nothing more bullish than a steadily building short interest. The increasing short interest is bullish because the short-sellers are aligned AGAINST the primary trend of the market. They're wrong, and in due time they'll pay for their mistaken positions.
But a large short interest in a bear market is different because here the short-sellers are aligned in harmony with the primary trend. Therefore, the best that a large short interest in a bear market can do it add violence to any upside action. But as major a plus, or as an indication of a new bull market, the short interest has little value under today's bear market conditions.
GOLD -- Probably because gold has been so relentless on the upside, today we saw a mild correction. This is calculated to cool the ardor of the public. At early stages of bull markets, the rise can be rocky, erratic and even frightening. This is part of the bull's wish to advance while taking as few investors as possible along for the ride.
A steadily rising item or market attracts "too many" late visitors. The subsequent little jiggles and shakeouts are meant to discourage the public. It's the market's way (in this case, gold's way) of saying, "Cool it, brother, take it somewhere else. Buying gold shares isn't the road to riches, you can lose money as easy as you can make it. In other words, stay out."
TODAY'S MARKET ACTION -- In a word -- dreadful. |
