The fast correction in the SPX from Sep. into mid - Oct. ended with a spike bottom and a
quick, triumphant rally to new highs. The argument here has been that spike bottoms are
frequently tested and that the market has been overbought since mid - Nov. To compound it,
the insouciant "buy the dip" crowd tried hard for a few weeks to push the market higher even
though it was already in a significant overbought condition. The hope here was to cruise
through the ending days of 2014 on an upswing with a combo Santa Claus and Sugar Plum
Fairy rally and to leave whatever worries to be sorted out early next year.
However, it only took a very brief period without good positive momentum for another
pullback to develop and send the market into another sharp short term downtrend. The SPX
is now mildly oversold and should begin to attract long side interest soon. However, even
if the SPX were to begin rallying again here in the next few days, it would put the trend off the
spike Oct. low on a very high trajectory which would likely not sustain before the market
would face more remedial action. SPX Daily
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!