Friday, October 30, 2009

The Total Spin Zone

No, not Bill O'Reilly.

Like Keith Olberman talking up Obama or Sean Hannity talking up Bush, mutual fund managers are applying maximum spin to get the public to part with their cash. I love it when one quotes the technicals, specifically how breadth is still strong. Yes, the advance-decline line is still OK and new 52-week highs beat lows but when we look at individual sectors we see the real story. Group after group has broken down. That is all we need to see.

I was accused of being a perma-bear during the latter half of the rally (basically missing July, which admittedly was huge) but in August I did get with the program. Why? Sector after sector was breaking out from technical patterns. Even though the total gains were muted I knew enough to stop fighting the tape.

Now, we see the opposite. Sectors are dropping like flies.

Check out this headline from MarketWatch mid-day Friday:

Early-cycle bird gets worm -As investors hunt for higher returns amid a “new normal” of reduced expectations, analysts point to early-cycle stocks as among those that stand to gain as Asian demand for goods picks up.

Nice fundamentals. Too bad the tape is saying just the opposite.

Thursday's rally has been obliterated. It may yet turn around today and close well but the impetus for Thursday's performance is gone. Something new will have to take its place to fire up the herd. What will it be? I'll take suggestions.

2 comments:

Banksie said...

Mike,

I been following you from Jamaica on Barron's for the past couple of months and I'm totally with you on your outlook. Been bearish on the market since earlier this year and got obliterated on a market short trade but remain bearish even after yesterday's rally.

I'm waiting on the Dow to take out the 9660 point, which looks like it could happen in short order (on the other hand, it could bounce off the TL). Breakouts in the financials, in energy and in countless individual stocks (AA, BOA, C and HD to name a few) coupled with downtrending and now negative OBV readings are just too strong to ignore, even in light of "great" fundamentals. And if 3.5% GDP can't convince the market to sustain an uptick for two consecutive days, I don't know what can ...

Ted said...

For a suggestion---how about a turn-around in domestic employment? Better yet if it includes any jobs with more than minimum wage....