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Sunday, May 31, 2009

Market Thought... i will be selling

The last few minutes of Friday's trading was an awe-inspiring moment of short-squeezed that I found interesting and uneasy.

Interesting in that the rise of the last few minutes were, imo, a classic short-squeeze/manipulative move. Uneasy in that it gives a grossly false sense of bullishness.

Like an obvious play book we start hearing Cramer and others use it as a justification to our bull market status. But there are plenty of others that do not... hence the still great divide between bull/bears.

Well which is it? Are we in a bull market or not? Lets take a look...

There are a few indications of a hardcore bull market (since March). Most indicative of this are commodities... obviously. The bullishness can be seen with Gasoline, Oil and Emerging Markets.



Emerging Markets (EEM):

These charts are impressive, but to say they lead this market is incorrect. Simply because they are not.

Notice all started their bullish moves early March. While they may have bottomed in Nov, they started the bullish move WITH THE EQUITIES MARKET.


As such, this is one negative to debase the theory of using commodities and emerging markets as a 'tell' to the US market.

The other negative is that emerging market are a primary function of commodities, and commodities (especially oil) are a function the dollar. And since the dollar collapsed this month, it is supporting commodity prices as a function of economic math... not fundamentals (at the moment).

UUP (dollar relative to a basket of currencies)

Ever since this market started its rally I have been using the 200SMA as the point of real resistance for the
SP500. And observing some of the overbought conditions in above charts, and the threat high gas prices does to the recovery, I am hard pressed to back away from that thesis. With that said however, the month of May was a consolidation month. The SP500 was very flat and sideways for the entire month, with no pull back.

There are a few indication that we are hitting resistance within this rally via the Nasdaq, Semis and Copper.




Basically, things are getting overbought, and we are going to need some real juice to breach these levels.

We can see a melt up, to keep pushing the markets up, but my prudence dictates to take profits and wait. So I will be looking to sell my positions next week, and wait for opportunities to arise.

(Depending on whether or not UNG sees 17-18, I will most likely keep the Nat.gas play.)

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