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Tuesday, September 1, 2009

Can We Trade In Our "Clunker" Government?

The "buy the dippers" were out early this morning, but there was just one problem: There weren't enough of them. the market turned tail propelled by sales figures from Ford and Chrysler that badly missed estimates, despite the overwhelming success of "cash for clunkers. It was down hill form there, with the psychologically important level of 1000 broken in the last half hour.The price relative on the Dow industrials bottomed out in late June, right about the time the market started to look bearish. Even during the "Meredith Whitney rally" in July, it was going up. Divergences like that eventually catch up with the market, and it looks like it might be starting to here. Apparently not all the big money boys are on vacation, some of them may heve just been sitting back, waiting for the right moment to hit the panic button.

Volume was pretty heavy on the Nasdaq, and a test of the 50dma looks like a foregone conclusion. With this kind of volume, I don't expect it to hold long. We've got a week before post Labor Day trading begins, but we may be getting a picture of the markets direction now.

the Russell 2000 stayed under the midpoint of it's current range most of the day, and is underperforming, what you would expect to see in a correction. Agai, I think aq test 0f the 50dma is in order, and if it holds it's the bullish signal of the decade. If not, I wouldn't hazard a guess how low it can go.

The market's sudden change in direction, on heavy volume, had to be a discouragement for the bulls, but it should not have come as a surprise. the recent dovergences and the outperformance of the "zombie" stocks i posted this morning (afternoon for you eastern folks) are indications to me that a top is either here or near.

The new highs update will be in a couple of hours.

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