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By Dr. Alexander Elder and Kerry Lovvorn
Key technical indicators are flashing signals that occur only at the ends of bull markets.
First, two friendly comments. We're market technicians and study market patterns to draw trading plans. Instead of tracking book values, P/E ratios and such, we look directly at current market action.
We trade current reality rather than some underlining numbers which may or may not translate into prices. On April 16, we published "Three major signs that the bull market is ending” , and this is our follow-up.
Also, in response to readers' comments that the charts were too small, we're adding a link underneath every chart that will take you to a page where that chart can be viewed in full size.
Dow Monthly—click link to enlarge chart
This is a monthly chart of the Dow Jones Industrial Average DJIA -2.22% , where every bar represents one month of trading.
Below the bar chart is an indicator called Moving Average Convergence-Divergence (MACD), and below it another indicator called Force Index that tracks trading volume.
As the stock market rallied to its new bull market high in spring of 2011, MACD rallied to its peak "X". It confirmed the strength of the bull and called for higher prices ahead.
By the end of 2011, monthly MACD fell below zero in area "Y"—we call this pattern 'breaking the back of the bull."
Finally, this year, as the stock market rallied to its new peak, MACD topped out at a much lower level in area marked "Z”. This pattern—a higher price accompanied by a lower indicator peak—is called a bearish divergence. These are exceedingly rarely seen on monthly charts, where they occur only at the ends of bull markets, most recently in 2007.
11 comments:
I moved this morning comments as I just post a new thread
Anonymous said...
Interesting posts guys/gals. With the Italy downgrade, their 10Y is likely to rise above 6%, Spain is spiraling and the US debt ceiling is near. Add another trillion or so to the debt with no reduction plan and the US will be downgraded again. The ECB and FED will have to step in and print. Scary time we live in.
2 OZ.
June 2, 2012 6:22 AM
gaw said...
http://www.bloomberg.com/news/2012-06-02/merkel-rejects-debt-sharing-as-obama-urges-end-to-crisis-cloud.html
"German Chancellor Angela Merkel hardened her opposition to joint debt sharing in the euro region as President Barack Obama singled out Europe’s leaders for not doing enough to stop the financial crisis...Merkel rejected joint debt issuance in the 17-nation euro area as a solution, saying “under no circumstances” would she agree to Germany-backed euro bonds."
Germany is not going to pick up the tab for EUrope, as recent opinon polls there are running very strongly against more Failouts.
Those continously calling for bigger/wider Failouts are just paid Bankster shills, trying to prop up their paymasters, the usual gang of criminal financial terrorists.
June 2, 2012 10:37 AM
gaw said...
"Odds of Romney win rise with falling employment data" according to InTrade.
LOL
Obummer, The Cretin-In-Chief, is panicking, singing "Blame it on the EUros, EUros, EUros" (to the tune of 'Blame It On The Rain').
Of course, he can't mention his own total incopetence, and constant Bankster ass kissing, and complete failure to rein in the criminal financial terrorists known as 'Wall St'. Nah.
June 2, 2012 10:46 AM
gaw said...
ZH: "Why A Grexit Would Make Lehman Look Like Childs Play"
"Peter Tchir of TF Market Advisors
...I fail to see the optimistic case of a Grexit. Every time I try and play through scenarios where the IMF and ECB come to the rescue, it seems like it will be far too little and far too late."
June 2, 2012 11:07 AM
gaw said...
Good analysis there of how a Grexit would be painful for the global financial terrorists, and thus the global economy.
He does not discuss the total external exposures to Greek debt, which from I have read on ZH (quoting a JPM study IIRC), is about E 1.3 Trillion, a total that includes most of the debts (mostly Bonds and loans) of Greek sub-sectors like cities, other local Governments, private and semi-private and public owned companies, water and power authorities etc etc etc - which you won't find even mentioned in the clueless MSM discussions.
That E 1.3 T total is probably low, as it could not include non-disclosed to the public loans between private parties (example: a Swiss Bank loan to a private Greek company) - I would guesstimate it at E 1.5 T, maybe more, as the real total.
Losses will be near 100% on all of that, as Greek Governments and private debtors will have little to no motivation to repay anything in the event of a disorderly default/Grexit from the EUro system. In fact, they will be motivated to burn them totally, blaming foreign creditors like the ECB for the sorry situation.
So you can see why the Banksters are so desperate to keep Greece in debt slavery, and thus why their faithful servant Obama is so worried.
I heard a MSM discussion today where they were talking about how Greece is such a tiny portion of the global economy it is just overblown hype now - hardly.
Spain is Greece X 100, which is why we are in full blown panic mode now.
June 2, 2012 11:17 AM
and I am so tired I cannot use proper grammer. I have two buyers from Yvonne's car today and I have it at an auto repair shop just to be safe. Don't want to take any chances showing the car alone.
Lots more comments on the previous thread!
i agree, as I've said before, that the market has turned. In fact one or two sectos' internals are getting so weak that they may be nearer the end than the beginning of the correct, for example the energy complex bullish percent index:
http://scharts.co/KGfClG
It could be heading for a double bottom. FAR too early though to think about getting in imo.
The overall market is very wwak however, which doesn't mean it can't bounce.
Let's make some goldbugs head's explode, for fun, get them to read:
http://ftalphaville.ft.com/blog/2012/05/31/1023571/debunking-goldbugs/
http://ftalphaville.ft.com/blog/2012/05/31/1025161/golds-anti-social-behaviour-order/
Very good discussion in the comments on those.
I say, own some gold, but don't let it own you. Izabella there ( a very good analyst, btw) is a bit harsh on the metal heads there, but she is probably fed up with the hateful responses goldbugs have to any divergent viewpoint - I bet she got an Inbox full of flames for her trouble there, which only proves her point.
This thread seems to be eating comments, I think Queen's big one with the cut'n'pastes throws Blogger for a loop.
Hope everyone is having a good weekend.
GAW, gold-buggery is a religion. It knows no logic. There's a strong emotional component to god-bothering and gold-buggery. In your long and diverse lifespan, you've probably tried to talk to people about the foolish points of their religious views. Didn't sink into their mindsets, eh? So it is with using facts and reality on the 'bugs.
I say that as someone who owns some stuff I can drop on my foot. But I'm not wedded to it. I'm kinda like a person who goes to church for the monthly suppers, or to scope out widows at funerals of their late, rich husbands. Speaking of which, I'll be at a Baptist church this evening (the church where our food-growing club has its community garden plots) for a pig roast to welcome the new pastor. I plan to talk about food, not faith. At least you can talk sense to people about the best way to grow tomatoes. Talking god and gold, not so much...
Hey no religion talk here unless I am doing the talking. LOL
Sorry if the long comment caused issues. Sold the car and to a happy customer and not the first one. I didn't like him for some reason either. You know I have an intuition about some people the minute I meet them. Fortunately, another person wrote to me this morning and practically begged me to hold it for his son going to college. It was a pleasure doing business with him. I should go down to my dealer and convert the cash into gold.
As for gold and silver bugs you really cannot make any rational conversation with them. Can you imagine Jim Sinclair who is one smart guy ever agreeing that gold is not the best investment ever?
I tried to comment on Silver Doctor only to get flamed and I thought I was being very fair. Wow there really are some hateful people there, but luckily there are others like 2OZ who have become a part of The Hive. I hope 2OZ stays a long time. I have a feel he or she has some good things to offer us.
Please look back at the last post as there were a lot of good comments. I just brought forward the ones from this morning.
The market doesn't scare me one bit. For one it hasn't even gotten back to last fall's levels. The second thing is that buffett wrote some puts that come due in september of this year. buffett is friends with hopey and the bernank. no way in hell they won't rescue the poor beleaguered billionaire in distress if the market moves against him. socialized risks, privatized profits.
best to all
The unique thing about Friday was that gold soared while the usual consumer, banking, retail and industrial junk flopped.
As far as goldbugs go...the key point is that gold is not a "commodity". It's MONEY...'nuff said!
gold is not a "commodity". It's MONEY...'nuff said!
True dat! It strikes me as weird that when you (I would never say "when I" in this case) buy gold bullion, there is no sales tax. Not so with platinum, silver (at least in some countries like Switzerland) or when you buy non-bullion coins like junk silver. And you can move gold across international borders without paying customs duty on it. At least that's been possible in several situations which I've been acquainted with. There is scrutiny, yes, but not taxation like there would be if it was gold jewelry, or gold watches.
This special status in the eyes of the law of multiple countries is an indicator that TPTB regard gold as money, and they're not going to charge you fees made of money when you're buying or carrying another form of money. This will probably change when and if enough little people start doing things with gold. (Aside from us financial nut cases here, how many people do you know who have ever held so much as a single 1 oz. gold coin in their hands?) If owning gold gets to be popular, only the certified 1%ers will be given licences to avoid taxation and confiscation when they dink around with gold. The rest of us will be criminals if we try it.
Just like we are regarded as criminals if we try to fly on airplanes, or display our disagreement with government policies by demonstrating, or so many other activities which used to be accepted parts of living in a democratic society. Your government regards you as the enemy, citizen. Stay in line, do what you're told, don't disagree with anything TPTB decide to do, or you will be hurt real bad.
From GAW: if a Grexit or Spanexit etc
I hope it gets called a "Spanxit." Say it out loud. Sounds naughty...
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