Major Correction Coming?
The Dow took at 105 points last minute hit today as tapering fears hit the market.
Fundamentals
The recent market weakness has been both fundamental and technical in nature with very strong indications on both sides. On the fundamental side, it is nothing other than the imminent tapering of the Fed bond purchase program. The fact that the minutes suggested hesitation in the tapering decision due to the still soft labor market, encouraged some buying into the release bringing the market into the black. However, investors who made their money this year so far are obviously selling into every bit of strength that presents itself in order to take profit in the face of the uncertain tapering. Yes, if it happens, it will be announced too quickly for most investors to react to. As such, we should see very limited upside for both the equities and bonds market as investors take profit from both the high equities and bond prices. Indeed, it is very rare to see investors get out of BOTH the equities and bonds market to hold cash and probably Gold. When does investors typically do something like that? Before major market crashes... and the evidence continues to present itself...
Technicals
The Hindenburg Omen is triggered! This is a set of technical criteria that usually triggers just before major market crashes and has faithfully predicted the tech bubble crash and the 2008 crash. And sadly, it ties in quite nicely with my prediction this week... that the market is going to see some nasty drops. As mounting evidence presents itself to downside, I have also prepared my Master's Stock Options Picks (its only $99 per month for thousands in profits!) subscribers to downside... a few days ago... so we are holding in profit right now. However, I won't be surprised to see a few days of relief rally, or Bull Trap, after such strong consecutive drops. For those interested in the Hindenburg Omen, it is:
1) The daily number of stocks that hit 52-week highs AND the number of stocks that hit 52-week lows are both 2.2% or more than the sum of NYSE issues that rise or fall that day.
2) New 52-week highs cannot total more than twice the number of new 52-week lows.
Fundamentals
The recent market weakness has been both fundamental and technical in nature with very strong indications on both sides. On the fundamental side, it is nothing other than the imminent tapering of the Fed bond purchase program. The fact that the minutes suggested hesitation in the tapering decision due to the still soft labor market, encouraged some buying into the release bringing the market into the black. However, investors who made their money this year so far are obviously selling into every bit of strength that presents itself in order to take profit in the face of the uncertain tapering. Yes, if it happens, it will be announced too quickly for most investors to react to. As such, we should see very limited upside for both the equities and bonds market as investors take profit from both the high equities and bond prices. Indeed, it is very rare to see investors get out of BOTH the equities and bonds market to hold cash and probably Gold. When does investors typically do something like that? Before major market crashes... and the evidence continues to present itself...
Technicals
The Hindenburg Omen is triggered! This is a set of technical criteria that usually triggers just before major market crashes and has faithfully predicted the tech bubble crash and the 2008 crash. And sadly, it ties in quite nicely with my prediction this week... that the market is going to see some nasty drops. As mounting evidence presents itself to downside, I have also prepared my Master's Stock Options Picks (its only $99 per month for thousands in profits!) subscribers to downside... a few days ago... so we are holding in profit right now. However, I won't be surprised to see a few days of relief rally, or Bull Trap, after such strong consecutive drops. For those interested in the Hindenburg Omen, it is:
1) The daily number of stocks that hit 52-week highs AND the number of stocks that hit 52-week lows are both 2.2% or more than the sum of NYSE issues that rise or fall that day.
2) New 52-week highs cannot total more than twice the number of new 52-week lows.
3) McCellan Oscillator, which measures the difference between the number of rising stocks versus the number of falling stocks, is negative.
4) The NYSE Index rises above its 10-week moving average –meaning it’s greater in value than it was 50 trading days ago.
For now, the Dow remains in short term bear trend within an intermediate neutral trend and primary bull trend.
posted by Jason Ng at 5:59 PM
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