Still more from Heinz on the Markets
Date: Mon Mar 15 2004 17:26
trotsky (cowpoke) ID#377387:
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what is expected by most is seldom what actually happens. i recently commented on the astounding complacency and the sheer overwhelming size of the bullish consensus in the market, which by some ( not all ) measures has set historic records. at the same time, numerous bearish divergences were in evidence at the recent highs ( inter alia per the Dow theory ) , and the slide thus far is already a statistically abnormal occurrence in terms of its swiftness.
something smells very wrong to me, which is why i brought the topic up. in this context, note that i still expect a severe consumer led recession to eventuate soon - and often, recessions are marked by a brutal decline in the stock market about 3 to 6 months BEFORE they actually begin. the April 2000 crash in the Nadaq would be a good example of this phenomenon ( at the time, no-one thought a recession was even remotely on the horizon, but it began 6 months later ) .
luckily we know what to look for w.r.t. the crash potential. one thing is for instance continuing sharp declines compressed in a few day in spite of severe 'oversold' readings. a frequent phenomenon is also the 'warning shot decline' - a strong down day, which recovers its intraday losses by the close, and is followed by one or two days of indecisive trading on high volume.
note btw., the recent sharp decline in bond and note yields from what now looks like a 'leading diagonal' looks set to continue from a purely technical perspective ( the consolidation of the move looks like a continuation pattern ) . it too says 'something is very wrong'. btw., although less visible, the bearish consensus on bonds is almost as pronounced as the bullish consensus on stocks.
anyway, i'm not 'predicting' anything yet, i'm just saying one should be mindful of the possibilities. |
