For three weeks now we have been flashing a bearish 'investor sell' signal warning for the broader US equity market (as measured by the S&P 500 depository receipts - SPY). This signal was confirmed with the second consecutive closing of the weekly 13 EMA below the 30 SMA last week and has been given further validity with another bearish close this week.
Five reasons why stocks may under perform for the next little while.
1. Year over year & Quarter over quarter earnings comparisons getting difficult
2. Short term credit crunch back underway
3. Seasonal window of stock strength over
4. Government stimulus ending
5. Regulation building
Because of these fundamental circumstances a capitalist ought to be cautious at best. Adding in the poor technical picture and any Rational Investor ought to just sit on the sidelines until the public is panicking once again...
As for downside objectives. A 50% retracement of the 1 year bull run would bring prices back into the 93 area. Additionally, a breakdown through the lows of just a few weeks ago would represent a bearish flag pole formation and suggest a target around 95. Because of these two technical objectives I shall be looking for the highs of June '09 to be tested in earnest over the coming months...
That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com
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