There were two possible signals that a bottom of some kind is close. Keep in mind, searching for top and bottom is the most expensive hobby. However some signs are hard to miss. First, CNBC ran special program (http://video.cnbc.com/gallery/?video=3000093787) “Markets in turmoil” where Cramer tries to scare the hell out of retail. If you have seen this man in action and have compared his recommendation for the last five years, you should know to do just the opposite of what he says. Secondly, GS comes with potential for return of bear market. ( http://www.bloomberg.com/news/2012-06-04/goldman-sachs-sees-potential-for-s-p-500-bear-market-on-europe.html) I know GS loves the Muppets and have the welfare of all Muppets in its heart. Therefore, Muppets, beware. Most likely they want to buy your stocks cheap when they know that QE is around the corner.
I am still not bullish and would have liked the 200 DMA taken back at the least. But a huge red day closed in tiny little green can be considered as a bullish reversal. More so when everything is so much oversold on a daily basis. The markets will be driven by wild reumour and I do hope (not a good strategy) that something comes out of Europe which will give some boost to the market.
Euro reversed in a big way and with it Crude and copper. I still think we are following last year’s model but that is based on the assumption that further QE will not come before August 1. If Bernanke comes with the money on June 20, as GS expects, then the situation changes altogether. We should be ready for such an eventuality because this is an election year. Technically speaking there is a positive divergence in the price action and RSI.
So for now I will go with my earlier theory of a bounce and continuation of sell thereafter. Come to think of it, we are exactly at the same place in SPX where we were on Jan. 3rd. So all the noise and bull rage of the last few months were for nothing? Why do we chase the markets on a 5 minute chart?
Anyway, US $ actually lost for the last 3 trading days.
Do you see a pattern here? A correction of US$ coupled with a bounce in equities, crude and other risk assets would correct the extreme oversold conditions for now.
Egan-Jones poked in the feel good bubble with a late in the day downgrade of UK. But there is G7 meeting tomorrow and the market will catch anything that is catchable to get a bounce. As I have said many times, at this point of time, a bounce is a sell. We wait for clear direction and save our capital.
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