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A Trepidatious Trader


For the first time since 2009, earnings growth for S&P companies has turned negative, which is a significant warning sign.

MINYANVILLE ORIGINAL At this time, I am seeing the post-Fed sideways to down market as a minor correction, which should give way to a rally so long as past resistance, 1420 holds.
The Federal Reserve has initiated a program of unintended consequences: Unlimited, open ended, unending unsterilized money printing.

Prior to this course of action, the underlining strength of the broader market displayed a significant number of daily, weekly, and monthly divergences against the prior highs established in 2011 and 2012. Yet since I highlighted the price action in July, SPX 1325, as a rather bullish explosive set-up based upon the convergence of moving averages witnessed prior to market tops in 2007 and 2011, the market has reverted itself to a neutral yet bearish undertone. Many of the internals that registered during spring months have been washed or will likely be negated on a further rally in equities.

At this juncture, what is more important than actual price movement in equities are the movements of technicals to confirm price. This is something we did not witness in May 2011 or June 2011 and this provided sufficient reasoning for turning outright bearish on the market. While there are still signs of a top forming, I am seeing signs that a case is to be made for a new bull market. Here are my primary thoughts on where the market stands and where we are headed.
1. We are still in a counter trend rally that began in December and should peak shortly. From here, we will eclipse the June 2012 low and bottom in between this low and the October 4, 2011 low, marking an end to the bear market in equities and establishing a new bull market.
2. The SPX will rally back to 2007 highs, 1550-1570, and mark an end to the bear market rally in stocks that began in March 2009. As you may recall, this was my market surprise for 2012. The following move will be a larger move down and this will mark an end to the bear market while setting the stage for a new multi-year bull market. This is likely to fall within the June 2012 low and the October 2011 low.
3. The SPX began a new bull market in March 2009 and established a new trading low in June 2012, which would bring 1600 into the picture and ultimately higher.
Let's go to the charts...
No positions in stocks mentioned.

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