Jim, quite an astute observation, and indeed the market will not be able to go much higher short term unless we get that steep yield curve to narrow down a little. That is one of a number of "negatives" in the market (I think that over the weekend I gave a list of 7 bullish indicators and seven bearish one, the steepness of the yield curve is one of the bearish indicators. So, why is not the market resuming its decline? I can give you a cynical response, and that would be that the "powers" are not yet ready to start the distribution process (they will want every single bull to be fully converted before they start the distribution process). A less cynical response is that I have rarely seen a situation where all indicators unequivocally point in the right direction. I will further point out that some other indicators point to an even more bearish position, and that is the equity P/C ratio which ended the day at a very bearish 38.7%. This is getting very lopsided, and on the "probability scale", this number together with the trin of the Naz at .20 indicates too much optimism, and thus slowly forces the probability scale back to the middle. (means, the turnips don't know what is coming next (g) with any great certainty (GG).) That means that people should start and think of taking "stuff" off the table. I have taken some already today (ended the day at 30% cash from about 15-16% at the height of my splurging last week). This observation together with a cycle extreme on the 23rd (if you remember I had that date as a potential bottom, now due to the market's action, this extreme seems to me to be a top) calls for reducing exposure by the afternoon on Wednesday this week. It might very well coincide with that "magic" number 2388. As for the trend after that, the nature of a retrenchment later this week (if indeed the 23rd is a top) will determine if my general bullish outlook stays intact or not. I may very well turn bearish again, not only because of the long bond and the P/C ratio, but if some supports do not hold, or if the call buying increases further on retrenchment and few other parameters that I am watching.
Zeev |
