Let me test my predicting powers.
I think today market action was very bearish (and I loaded more puts). First, the very happy rally of +170 points in the Dow was completely reversed to the -12 decline. And that was the 4-month intraday high combined with a complete reversal – fit the final exhaustion move.
Second, in the bear market, for any meaningful accumulation at the bottom you must expect financial stocks to outperform general indices. They are early leaders and they must lead. Today the broad financials XLF closed -1.01%, broker dealers IAI -0.94% and small mainstreet banks KRE are distressed and closed -2.08%.
Third, this is May. Sell your stocks and go away.
And finally, if this post is about stocks I need a chart. Here’s the chart, the discount (stigma) borrowing:
I think the rally from March 10th $SPX of 1273 to today intraday 1404 (nice 10.3% correction for a bear market) is over and we will start long and painful slide back to 1273 and below. The trend moves are usually slow and I expect the 1273 to happen somewhere in late June or even July.
Disclaimer: I’m just an anonymous blogger, my opinions are for entertainment purposed only
Update: Another chart, just to make the post longer. Here’s the ration of financials to S&P:
Financials are very early cycle leaders. Last time the ratio bottomed in a very beginning of a bear market, about 2.5 years till the bottom. But this metric we may easily have the bear market till 2010