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Thursday, June 11, 2020

Not a bull market 6/11

In Bull market or not? 6/5 I wrote:

"One thing that really sticks out in this rally is the buying of mom and pop investors.  Meanwhile the really well known investment stars like David Tepper and Warren Buffet are not.  The last comments I saw from Tepper were talk about a bubble.  Throughout the bull market he was not shy about telling people to buy.  He is not a perma bear.  I actually wondered if he was a perma bull because of his bullishness, but  now that he has switched I know that is not the case.  The little guys are buying stocks like mad while the big guys are not.  That is what we usually see at a bull market top.  I pointed out the retail investor buying back in Jan.  It continued as they bought the dip without fear.  The pros call them bag holders."

I was very skeptical we were in a bull market.  Today wiped out all those that bought the SPX breakout above the 200 DMA.

The question is now answered.  We do not get days like today in a bull market.  Breadth was -96% and volume was -98%.  SPX closed slightly below the 200 SMA.  All those people that bought the break out just got crushed.  We closed two of the gaps today.  There are still four more down below, but now we have two above. 

The futures crashed through the 20 and 50 SMAs like a hot knife through butter.  They are still well above the 200 SMA.

The red/green chart went from overbought to oversold in one day.  The short term indicator (which is longer term than the red/green lines) is still overbought.

There is a saying in the market that it don't matter til it matters.  I have been marveling at people bidding up stocks prices like there was no tomorrow when a recession had just started.  The virus numbers were going up globally and in many states that were opening back up.  Then the riots started.  Still, the market just did not care until today.  I always find that amazing.  The market is supposed to be smart, but when it gets carried away with emotion it cannot see what is right in front of it.  Then all of a sudden the market smacks all those playing along in the face.

Normally after a 90/90 down day the market bounces the next morning.  However, we are not in normal times so it is hard to say.  The ticks show the big boys were seriously on the sell side today.  With SPX back to the 200 DMA there is a possibility of dip buyers here.  Will the retail crowd see this as a buying op?  Time will tell.  If we keep going down like this we could start getting into limit down situations again.  I really do not want to see that anymore, once was enough.   I am hoping for a bounce to calm the market down a bit.  The only prediction I can make is that there will be volatility.  Be nimble or be on the sidelines.


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