Markets Can’t Catch a Bid

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Interesting pattern is developing: Each big rally is met by a big or bigger sell off. Last week saw a strong Thursday, followed by an equally weak Friday. Pre-election rally was followed by a post election serious whackage.

Out of the noise comes patterns, some of which may even contain some signal. The battle between buyers and sellers, supply and demand, may be shifting.

I am not concerned about most of the blather you hear on TV. Earnings are what is the biggest potential driver of lower stocks — not the election, not the fiscal cliff, not Europe, not the nonsensical uncertainty trope. Slowing earnings often mean weaker economies, and that may ultimately lead to lower asset prices. Ignore the nonsense coming from people with 18 daily hours of air time to fill.

If markets are going to bounce, it better be here. As the charts (after the jump) show, the Russell 2000, S&P500, Nasdaq 100, and Dow Jones Industrials have all broken their June 2012 uptrend, and are at or below their 200 day moving averages.

If you are a bull, here is where you buy ’em. If you are a bear, you wait for a drop, and on a rally attempt back to the 200 day, you short them — the wait for the attempt to regain the 200 day to fail.

At that point, the 200 month week moving average becomes a not unthinkable downside target . . .


Charts after the jump



Chart courtesy of MacroMan (click here if charts are not observable)


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