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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 !!!

Wednesday, June 12, 2013

Stock Market -- Confirmed Downtrend Near

The market has been heading down from an extended all time high of 1669 SPX. What's
left to confirm is a tipping down of the 25 day m/a coupled with a take out of the recent
closing lows of 1609 and 1612 SPX. SPX Daily Chart  Barring a fast and strong positive
turn, the technicals say lower. My argument since April is that when the SPX tops its
200 day m/a by 10% or more, it is very tough to make money on the long side over the
next six months. With the blow off move in May, the SPX went to a 12% + premium to
its 200 m/a, leaving the odds about 75% there would be unhappiness for the bulls ahead.
The extended time MACD on the chart also shows the decline is following a very sizable
overbought as well.

Why has the market been heading lower? The run up off the April closing low had mucho
powerful momentum which took the SPX up to an extended position and to a p/e ratio
that was the highest in nearly three years. When the momentum eased off, guys simply
decided to take some money off the table particularly after that last 100 point fillip in the
SPX on light volume.

The possibility of a significant correction is an intriguing one, not because of the fast
forming technical set up but more so in view of a continuing Fed ZIRP policy plus the
industrial strength QE program in place. Could all the taper talk prove one of the
bigger and more successful Fed head fakes or, perish the thought, are folks beginning to
realize they have been paying up for a decidedly mopey economy.

But before all of this, let's see if the market breaks short term price support and major
trend support over the next several odd trading days.

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