April 26th, 2012
in Gary's blogging
The markets are moderately overbought and investors seem to be complacent; not a good sign telling of a bull run about to happen. Then add in the earnings season which has been jerking the market all over the place and you have a recipe for a surprise in the making. I thought the signs of a bear run had already been given to us, but it appears that I may be incorrect in expecting a waterfall decline. It is looking more and more like a sideways channel processes than has it ups and downs, but much more subdued than a outright crash.
Then again maybe there won't be a buy/sell signal and there some very good reasons why.
First lets look at the markets how have they formed another sideways channel, specifically the SP500, something like the previous March 13th. to April 5th. only lower and below the now resistance as seen in Leavitt's chart this morning. What is important here is that this may be the way the markets are going to play themselves out over the rest of the year forming sideways channels and trading in tight zones.
In other words, I expect the markets to move down and start the next sideways channel below the one on the right hand side of the above chart. Sometime during the summer when we usually get a rally, or possibly a QE in June, We will see the markets move up into the channel we are in now. Why not?
One reason for the formation of sideways channels is the low volume. It is still below what it was this time last year and I believe that is what is screwing up the charts and other tea-reading exercises. DaBoyz and the 'Five-Fingered-Financiers' working the midnight shift, along with the algo machines, have moved the markets in tight trading ranges that looks suspiciously like games are being played and low volume makes that possible.
I think the malcontent mentioned above have moved markets to a unrealistic high level creating an false euphoria of additional heights to come in the eyes of some. The volume over the past 4 months could not have moved the markets this high as many investors have moved into cash or haven't decided what they should do. But with the red volume increasing ever so slightly over the past week we are getting a better look at the markets true level; which is a bit further down from today's numbers.
Who comprises this increase volume is not known as of now as the number of investors that are sitting on the sidelines is also largely unknown, but probably the single reason why the volume is anemic. It is this very lack of investors that is literally allowing the mischievous market manipulators to do what they want and that could explain the sideways channels, tight ranges and higher market numbers than warranted.
Think about it? How can you continually watch the markets remain at these levels with so much abominable data being thrown at us every day. The US government hasn't curtailed their spending, the UK is in a double recession, Apple is 'Cloud Stuffing' and we listen to the Fed's explain, month after month, their 'water-is-wet economic insights'. France is about to be lead by a socialistic new government with a dangerous Monsieur Hollande at the helm (read increase spending) and most of the Eurozone is already in a recession. China's economy is in the dumps as related to the tonnage of copper being stockpiled. This indicating a slowing of manufacturing at the least and I haven't even mentioned Portugal, Spain or Greece.
The May to September slump is still going to happen only modified because of low volume, manipulation shenanigans and other roguery games.
Having said all that, don't forget about a possibility of a war with Iran and then we will see an “exaggerated” decline and that my friends will be your signal. The bad news is that it will happen at night and you will walk up to seeing the futures already in the basement.
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Written by Gary