Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold & the USDX: Correlations - 2nd Dec 20
How An Ancient Medicine Is Taking On The $16 Trillion Pharmaceutical Industry - 2nd Dec 20
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Stock Market Topping Continues, Beware of Any Short-Term Rallies!

Stock-Markets / Stock Markets 2010 May 26, 2010 - 08:10 AM GMT

By: Claus_Vogt


Best Financial Markets Analysis ArticleThings have changed rather quickly for the stock market. Up until two weeks ago it was very difficult for a technical analyst to make a bearish argument. All over the world the big indexes were trending upwards, exhibiting no signs of technical weakness.

Trend-following indicators were rising, too. And indicators based on market breadth, like the advance-decline line and the number of stocks making 52-week highs or lows, were healthy. Last but not least the chart patterns showed no signs of deterioration.

To uncover any clues that risks had grown considerably, you had to look at indicators outside the realm of technical analysis …

Especially worrisome were monetary and sentiment indicators. Money supply had stopped increasing. Hence liquidity was drying up.

At the same time fund managers became more bullish than ever before …

Fund managers are almost out of cash.
Fund managers are almost out of cash.

A few short weeks ago mutual fund cash levels reached a record low of 3.4 percent, according to Jason Goepfert, president of The old record of 3.5 percent was set in the summer of 2007 at the very end of a cyclical bull market off the 2003 lows.

Back then it took fund managers 4½ years to get fully invested. But since the panic lows of March 2009, they only needed one year to accomplish the same thing!

The Chart Pattern Is Clear

What are all these indicators telling us now after last week’s stock market plunge? Well, valuation is still very high, and monetary indicators are clearly negative for stocks.

Longer-term sentiment indicators haven’t changed for the better. And the charts are showing very ominous patterns — patterns that look like potential topping formations.

In the chart of the S&P 500 below I’ve drawn the lower boundary of that potential topping formation. This picture is as clear as it gets: If prices break below this lower boundary, the huge rally off the March 2009 low is over and the bear market is back.


Source: Bloomberg

When Will the Breakout Occur? Or Perhaps It Won’t …

I say that because a topping formation is not confirmed until prices break below the lower boundary.

If prices don’t fall below the lower boundary, then the potential topping formation is either taking more time to play out, or it may turn out to be a frightening consolidation during an ongoing bull run.

Right now the arguments for an eventual — rather than an immediate — breakout are solid. The above mentioned valuation, monetary, and sentiment indicators strongly argue against a continuation of this huge rally off the March 2009 lows. But the technical indicators haven’t sounded the alarm yet.

Rarely do bear markets begin without a marked deterioration of market breadth or a tiring of trend-following indictors. Therefore, the scenario of an immediate market plunge is unlikely, especially since momentum indicators are extremely oversold right now.

They seem to say that a short-term rally could soon start from current levels. During such a rally the still missing technical deterioration could easily develop.

In an ideal scenario prices would rise back to token new highs, unconfirmed by the breadth indicators, to finally signal the end of this medium-term up trend, which in the bigger picture is nothing more than a huge bear market rally anyway.

Best wishes,


This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules