Great post by mannfm11 on prubear chat (one of their long-time best posters, especially on TA). He thinks we're at or very near the top:
prudentbear.com
You said a mouth full Mike and I agree. The way this market is behaving and the chart is beginning to look, I suspect we are coming up on a tremendous short opportunity very soon. Maybe the opportunity of the entire bear market.
There appears to be 2 markets here, a euphoric tech market and a stagnant Dow. The tech sector is affecting the S&P, with the heavily cap weighted 5 or 6 Nasdaq stocks that are in the index. Despite the fall, one has to realize MSFT still carries the market valuation of XOM and stocks like AMGN trade for multiples of capitalization of the 2 US automakers. There is plenty for the bulls to be euphoric about, but I don't see a euphoric move in this market.
What I do see is a ton of buying, a lot of bullishness and a market that isn't moving like it is a full blown bull that many are making it out to be. On the contrary, I see a market that is making ending formations on the charts, with only the cap weighted indexes really doing anything worthwhile on the long side. These are mirages.
I have contended on an Elliott basis that we never saw wave C on the charts off the bottom of October. Some contend we saw wave C in the fall, with the October bottom being wave B. It has been brought to my attention that the last leg of the fall rally was wave C and I didn't buy that idea, but I am starting to buy it. This wave just isn't behaving like a C wave. That doesn't mean we are at a high, but I would suspect we are really close to it.
Despite what everyone is claiming, the charts aren't showing a breakout here. What I am seeing is there is someone big dumping a lot of stock, as witnessed by the massive high ticks and little market progress. If this market insists on staying up, there is going to be a lot of stock fed the public. A lot of people are bullish, not because the market is going up, but because it isn't going down.
One thing is clear and nobody out there can dispute this idea. That is the Nasdaq, S&P and Dow are on different cycles. The Dow is in an ending pattern here, maybe not for the long term, but at least for the shorter term. I wouldn't be surprised to see the S&P and Nasdaq go to higher highs than they saw in the fall, but I doubt the Dow confirms. The result though is going to be the same, a rollover to lower levels.
For there to be a significant bull here, one would have to conclude the bear market ended in October. To verify that conclusion, I would suspect we would need a faster moving market now than we saw during that first rally time, not a stagnant market that is gyrating back and forth. The Dow is at 8500, not 9000 and the S&P isn't back to its highs either and those highs should be left in the dust quickly, not be mired in a market that is basically stagnant for a month now. This just isn't how a wave 3 behaves. It is more like an ending diagonal c wave of a wave 2, of wave 3 of 3 that started in the fall.
Some people need a news story and I will give you one. Civil war in Iraq. Now that we are in, how do we get out? We are now faced with a freed oppressed religious sect with thousands that are likely to act on the idea God told me to do it, with their leaders telling them just that. What we have brewing here is a $100 billion ticket the US has bought to hell. I'm not sure how well we would fare in a religious war or an arbitrator of a Civil War. Much is going to be revealed as to why Bush Sr. didn't get Hussain in 1991, the mess of how to get out after we got in. I sense nothing but a permanent military presense or a total withdrawl, leaving the country in ruins and chaos to prevail are going to be the alternatives. A hollow victory and not good news for American.
Corporate earnings aren't going to mean anything until they combine to produce financial valuations that make for a stock market bottom. As Mike says, to buy the market here means one has to buy the idea the bear market is over and the idea one better buy now or they will miss it. What I watch reveals the big money is selling, not buying. Who would buy but a naive fool.
In this analysis, I discount my prior run to the low 9000's by 25% and now say we roll over before we get there. This market isn't making for a very good middle wave of a C wave and at best on the bull side we get a flat back to the 7900 area before going higher. We aren't going too much higher from here. |
