Wednesday, October 28, 2009

Strong Indications of Market Top

Multiple pieces that would indicate a very likely top in the market seem to be converging. There have been a couple of instances in the past few months of what would look like a possible top in the market, but after a swift reversal the market has continued it's stimulus-driven rally higher. However we now have a majority of factors all pointing to what could be the start of another downleg in this far over-extended market.
Financials and Real Estate, the two most critical factors underpinning the foundation of the U.S. economy- both of which have moved up most sharply during this rally- are both faltering. Both indices (KBW Bank Index and Dow Jones U.S. Real Estate Index) have recently turned bearish from a technical perspective as illustrated by the charts below.












The Nasdaq and S&P both have broken the 50 day Moving Average for the second time this rally. The first time this happened was in early July, when what looked like a highly bearish picture for the overall market quickly turned bullish again. Could this be a more convincing top formation?



Emerging Markets too have succumbed to the bearish technical forces.

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