Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Market Time For Some Relief!

Stock-Markets / Stock Markets 2011 Aug 12, 2011 - 12:22 PM GMT

By: Sy_Harding

Stock-Markets Best Financial Markets Analysis ArticleWe’ve had enough bad news in recent months. It’s time for at least some temporary relief.

The economic news has been awful. The ‘soft-spot’ in the first half that was supposed to be temporary turned out to be worse than previously thought. GDP growth, previously reported as having been around 2% in the first half, was recently revised to being up only 0.8%.

The return of strong growth that was supposed to begin in July did not show up. Consumer and business confidence, which was expected to produce the improvement, instead deteriorated further in July, accompanied by unexpected further declines in both the manufacturing and services sectors.

The increasingly bad news has economists now saying that rather than the first-half ‘soft spot’ being temporary, the odds are 50-50 that the economy is sliding into another recession.

Globally the reports are similar, news of slowing economies, and serious government debt problems. The success of the additional bailout plan for Greece a couple of weeks ago is already being questioned, and Europe’s debt crisis is apparently now spreading to Italy and Spain, countries considered too big to bail out.

For investors, stock markets around the world have seen their bottoms drop out in serious corrections, some exceeding declines of 20%, which is the level that marks entry into a bear market.

Investors in the U.S. have seen $2.8 trillion disappear from the value of their stock market holdings in just over three months.

In my last column I said it was too soon to buy, that more declines were in store. And so they were. The Dow lost another 1,400 points, or 11%, in the first 10 days of August.

Enough is enough!

And there is at least some good news for the short term.

Technically, the market is short-term oversold again. That was a condition that created a brief but significant rally in early July.

It’s a condition that should produce another short-term rally, and have investors breathing a sigh of relief.

Unfortunately, like the rally in July, it’s likely to be another opportunity for investors to take some risk off the table by selling into the strength, rather than being the end of the correction.

I base that on a number of conditions.

Based on technical analysis and charting, the major market indexes like the Dow and Nasdaq are short-term oversold beneath their 50-day moving averages to a degree that almost always brings a rally back up to the moving average. That would be a rally to roughly 12,000 on the Dow.

But intermediate-term the technical picture remains negative. Important support levels were broken by the sharp decline since the April top, and the longer-term trend seems to be down.

And investor sentiment has not reached the level of fear and pessimism usually seen at market bottoms. For instance, the latest poll of its members by the American Association of Individual Investors this week shows 33.4% still bullish and only 44.8% bearish. In market corrections, the AAII poll almost always reaches a level of at least 55% to 65% bearish, and bullishness drops below 20%, before the correction ends.

Then there is the market’s seasonality. Historically, August, September, and October tend to be the most negative three-month period of the year.

And in the background, with consumer and business confidence declining to new lows in July, it’s unlikely the economy is about to reverse to the upside anytime soon, which is what the stock market needs to see to support a sustained rally and return of the bull market.

Meanwhile, the nerve-wracking up and down volatility is likely to continue.

Next week will bring a number of potential market-moving economic reports from the housing industry, and on inflation, two areas on which there have not been reports in the last several weeks.

So summing up, the short-term oversold condition makes a short-term rally likely, but with the correction likely to resume to lower lows when it ends.

I’m confident enough of a short-term rally that I and my subscribers took our significant profits on Thursday from the ‘inverse’ exchange-traded-funds I was recommending at my sell signal on May 8. But I think it’s likely our indicators will turn negative again and we’ll be re-taking the ‘downside’ positions when the expected rally ends.

But meanwhile there should be some relief, at least temporarily, from the relentless selling that seemed to have the stock market in freefall.

Sy Harding is president of Asset Management Research Corp, publishers of the financial website, and the free daily market blog,

© 2011 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 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