July 30, 2010

Markets went nowhere within narrow pivots on average volume.

Short-term: 4 yellow
Intermediate-term: 2 green, 2 yellow – tending yellow/green
Stock targets: 36% swimming, 34% neutral, 29% sinking

The index-driven stocks are all continuing to cross over technical thresholds simultaneously. Not really great for “leading” stocks since portfolio money now gets distributed more widely. This sort of technical convergence doesn’t happen very often — the last five times were Oct 2004, Nov 2005, Aug 2006, Dec 2007, Jun 09.

The first signified the end of the first correction period off the 2002 lows, second two signified the end of correction/stagnation periods in a longer cyclical, the third the last gasp of that bull and the beginning of the 2008 bear, the fourth the confirmation of the move off the Mar 2009 lows. In each case, whatever has led the move beforehand has handed the reins over to something else. The main difference being how big that “substitute horse” has been — in two cases being rather smaller than a Shetland pony and hence not being able to take the weight of a bull.

So the question you have to ask yourself is this time more like Aug 2000/ Dec 2007 — or more like October 2004? If you know the answer please tell me.

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