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Thursday, May 30, 2013

Eerily similar to 2010

There are some things that are eerily similar to April 2010.  That was just before the infamous flash crash.  I showed this chart last week.

We had the biggest drop in the number of new highs from one day to the next since 4/27/2010.  That was a considerable change in the character of the market.  Very similar to 2010.

Check out this chart from Shaeffer's investment research.


Here is a snippet from the article that explains what a buying climax is if you are not familiar.

Last week saw 673 buying climaxes, the most since 4/30/10 and a subsequent 17% drop in the SPX.  A buying climax occurs when a stock makes a new 52-week high, then closes lower on the week.  Large clusters of them can show deterioration under the surface.  To see such a large amount last week is definitely a concern to be following.

We had very few buying climaxes last year.  The numbers have picked up this year with two previous spikes before the big spike last week. This is only the second time in this bull market climaxes crossed 600.  The market took quite a tumble last time.  Will it be different this time?

But wait there is more.  Here is the weekly TLT chart from back in 2010.

In early April of 2010 TLT made a new 52 week low as shown on the chart.  The prior low was from June 2009.  Here is the current chart of TLT.

This week TLT made a new 52 week low.

We won't know for some time if any of these similarities mean a big move down is coming.  However, it really is kind of strange how similar the market is acting.  It seems to me there is a very common feeling among market participants that any pullback will be short and shallow.  I am sure that comes from the action over the last few months.  Every little pullback has been bought.  However, there is a reason why we always see the disclosure about how past performance is not necessarily indicative of future results.  There is volatility in both Japanese bonds and equities.  I don't know if that will leak into the rest of the world's markets, but I think it could.  It is hard to say what would be the cause of a big move down.  It always seems to be something few if any expect.  I see a very complacent market with some possible warning signs that things might not be as calm as they seem.  I think this is a good time to be a little cautious.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.