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Friday, May 2, 2014

Daily update 5/2

Sell in May has been just that so far.  Despite upside probes both days we ended slightly lower.  I want to start off with the weekly SPX chart tonight.

Ever since March we have alternated every week in a different direction.  I believe this is a two month distribution pattern.  At one point we had 10 upside gaps in 11 days, but ended that period lower.  We have had many more upside gaps in the last two months I just quit counting them because it was nearly every day.  I don't know who is behind it, but this sure looks like a coordinated pump and dump operation to me.  Bid the futures up overnight and sell stock into the opening frenzy.   Lets take a look at the daily chart.

Over the last two months we have formed a triple top with resistance right at 1884.  We only managed two closes above that number.  We had a number of probes right up to it.  In the last two weeks it looks like we are possibly forming a short term double top at that same resistance.  The last two days look like a picture perfect reversal pattern.  Yesterday was a doji symbolizing indecision and today was an inverted hammer.  These two bars need down side confirmation, but they look like a short term top.  Here is a peek at the SPY 60 minute chart.

SPY closed with a confirmed break of the 18 SMA.  Combined with the two daily candles this looks like a short term top to me.  All that is needed is a break of the 50 SMA to confirm it.   

Sell Mortimer, sell.  That is what this feels like to me.  I have a voice in my head that is screaming that this is the final high in this bull market and another vicious bear market is about to start.  The low number of new highs.  The number of broken SPX stocks.  The number of indexes that are lagging is glaring.  All the upside gaps over the last two months and yet we aren't higher.  They say nobody rings the bell when it is time to sell.  I have never believed that for an instant.  The market never makes any big move without lots of clues leading up to it.  Always.  I recognized both the 2000 and 2007 tops, but I swear the market is ringing the bell louder this time then ever before.  The three peaks and a domed house pattern in the Dow started forming last May.  We are almost a full year since the top started forming.  The 2000 top was 6 months in the making and 2007 was 4 months.  This is by far the longest.  We will only know in hindsight if that is important or not.  My gut feel is that this time is different.  I think the next cyclical bull market will not make a new high and that we will not be back to this price level for a very long time.  I firmly believe this is yet another bubble.  When it pops it will devastate a lot of investors.  After three big crashes people will be much less willing to bid prices up to nose bleed levels. I think those that decide to ride it out no matter what will be very sorry.  The stock market is not an all or nothing proposition.  Exposure can be reduced.  One does not have to sell everything at once.  However, everybody should have a plan.  What will you do if the market crashes 50% again?

Looking at the charts tonight I expect Monday will be down.  If the alternating weekly pattern continues we should be down for the week.  On the long side SPY needs to get a confirmed break of the hourly 18 SMA.  I have to include that just in case I am totally off base here.  The last four years have seen a sell off that started in April or May.  Three of the four years we bottomed in June or July.  I think this year we will keep going into Oct. like 2011 did.  Remember the Jan. barometer was down.
Here we are in May and many indexes are flat or down for the year.  None of that happened the last four years.  The first four months are different this time.  I just don't think we will see that June or July low and off to the races again.

The market and sector status pages have been updated.  Have a great weekend.


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