The S&P 500 managed to close at a new high, with most fund managers reporting good results for the quarter, but does this signal a new bull market or a last-gasp effort to lock in performance bonuses before the market subsides into a correction?
While markets may be rising, there is strong risk aversion.
“@bespokeinvest: Utilities P/E now up to 16.75, higher than the P/Es of Tech, Financials, Industrials, Health Care, Energy and Materials.”
— Downtown Josh Brown (@ReformedBroker) March 28, 2013
This is definitely not a classic bull market.
One also needs to be wary of September and March quarter-ends. They often represent significant turning points, with new highs (red arrows) and new lows (green arrows) frequently proving unsustainable.
* Target calculation: 1530 + ( 1530 – 1485 ) = 1575
While there is no sign of divergence on 13-week Twiggs Money Flow, which would indicate unusual selling pressure, it is important to remain vigilant over the next quarter rather than blindly follow the herd. Bearish (TMF) divergence or reversal of the S&P 500 below 1500 would warn of a correction.
The indicators I follow are all showing bearish divergences on SPY and XJO. Also when copper is correlated with equities one can have higher confidence in equities movements – it is in a downtrend at the moment (having broken down out of a pennant pattern that started in Oct 2011, the opposite of the ASX 200 and the SPY. Also, we don’t have the BHPs and RIOs participating in this rally, quite the reverse, in strong downtrends.
In the US I trade TLT a long term bond ETF. Typically this moves opposite to SPY. Interestingly it has been rallying since March 8th and the weekly chart shows a strong bullish divergence.
Yes of course the SPY and XJO can rally from here, but caution is warranted. I personally would not be surprised by a pullback here, in fact it would be a far more healthy for the current rally if we saw this. But the market doesn’t listen to me and will have the last word as always!
How about a study or an article on the un-natural chart patterns exhibited by the ETF Funds.