Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

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