Awaiting Technical Weakness a la May 2008 ~ The Risk Averse Alert

Tuesday, August 11, 2009

Awaiting Technical Weakness a la May 2008

Per the market's anticipated collapse, seems it is not likely to be but days away. Rather, it might instead take time to develop, possibly carrying us into sometime next year.

Truth is a marked deterioration in the short-term condition of various technical measures is better expected prior to panic sweeping across global stock exchanges.


As you can see, it was not until last summer (2008) — well after the market had topped in October 2007 — that both the S&P 500's relative strength and momentum were locked into the sell-side of their respective ranges. With that the setup for last fall's collapse was established. Prevailing weakness was primed to turn into panic.

Now, behold, both RSI and MACD presently are registering on the buy-side of their respective ranges. Yet I am not the least bit bullish. Rather I simply am alert to the likelihood that, collapse probably is some weeks away (if not months), awaiting the re-establishment of short-term underlying weakness.

Right now the technical condition of indexes like the S&P 500 appears much like May 2008. Consider how both RSI and MACD behavior from October 2007 - March 2009 remarkably echo their same respective performance from October 2007 - March 2008. Then, see how in the S&P 500's current counter-trend rally these same technical measures exhibit similar relative behavior as occurred during the index's counter-trend rally from March 17 - May 19, 2008. Interesting.

Likewise, it's quite possible the current counter-trend rally is not yet complete. Nevertheless, its end is a lot closer than the Shempster will have you believe. This I am sure of.

Still working the hard summer chores — landscaping and window repair in particular — with scrapes, dings, blisters, etc. to show for it. Typical of me the job is taking longer than the week I anticipated. So, in case you're wondering ... I am not growing bored with this blogging gig. In fact, I quite like it and recommend that everyone leave this kind of legacy revealing one's sense about this extraordinary time in which we live.

So, with that, my apology for posting late these past two weeks. Don't mean to upset your routine.

Fast Money
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