Capitalogix Commentary for the Week of 05/03/10

The rally finally ran into some resistance.  Still, the Dow Jones Industrial Average remains above 11,000.  However, the thing that caught my eye last week was that the Dow
broke below its recent trend-line.  By itself, not a cause for major concern, just a key to notice.  The question is whether it can get back above that level, or will this be the start of a more meaningful correction?

100503 Dow Under Its Trend-Line
It is also worth noting that the MACD indicator is showing more downside momentum than it did at the same price level earlier in April.

A Peek Over the Wall.

China's Shanghai Index sending a warning about the world economy or just
their economy?

Unless things change in a hurry, China's Shanghai
Composite could drop significantly.  This chart shows the triangle
pattern that played-out over the past nine months.

China Shanghai Index Break Down

You can think of the Triangle as a well-contested battle
between the bulls and the bears.  Inside the pattern, neither side
gives-up much ground.  However, when one side loses conviction, the
market  surges in the direction the winners push it. 

are often continuation patterns.  So, be wary that this move is a
head-fake down to trigger a big rally.  Otherwise, the target is pretty
far below.

Sentiment Here in the United States is Still Very Bullish.

While stocks have certainly become more volatile in the last two weeks, newsletter writers seem to be taking it in stride.  According to Bespoke, the latest Investors Intelligence survey of newsletter writers  found that 54% of those surveyed are now bullish on the market.  The last time bullish sentiment was this high was back in December 2007, before the crash.

100503 Investors Intelligence 042810

Another important to measure of the crowd’s extreme bullish sentiment is that fewer than 20% of advisors are currently bearish. According to Prieur du Plessis, these are first indications of a market top.

Another Sign of a Potential Top?

The U.S. Treasury Department plans to sell “up to” 1.5 billion
shares of Citigroup in the government’s
biggest step yet to exit the 27 percent ownership of the bank it rescued
during the financial crisis. Bloomberg quotes Geithner as saying: "We’re
putting TARP
out of its misery," and "the government is withdrawing from the
financial industry after forcing lenders to recapitalize with private

If you think that is funny, then so is this cartoon.

100503 Uncle Sam the Day-Trader

Business Posts Moving the
that I Found Interesting This Week

Lighter Ideas and
Fun Links

that I Found Interesting This Week

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