Tuesday, June 2, 2009
Calling the top in the stock market
is always fun to try. I would be willing to call a top in the S&P 500 tomorrow if three charts have a "good" bearish day. You have to understand that I am very bearish on stocks right now and think they are overripe for a quick decline to re-test the March lows before mid-August. Knowing what comes next makes it harder to participate in counter-trend relief rallies even though I knew they were coming when the late fall panic lows hit (see here, here or here among others).
But now is not the time to be bullish, it is the time to be bearish on just about everything except U.S. Government debt and the U.S. Dollar (yes, this practical Gold bull thinks the U.S. Dollar is about to rise relative to other trashy fiat currencies and yields on most U.S. government bonds are about to go down not up). Gold has room to rise some more as well as a panic play, but I wouldn’t put new money into Gold or Gold stocks right now if you’re not already in this sector. I think general stocks, commodities, and corporate bonds are about to get killed.
The three charts are, in no particular order, all financial charts. The financial firms led us into hell (they topped in early 2007 way before the stock market) and they will lead us there again over the next year. Topping is often a process and I thought it would be complete for general stocks before May was, but I was off. This does not in any way change my bearish stance and I still think the next leg down in this bear market is imminent.
The first I have talked about before, the Philadelphia Regional Banking Index ($KRX), which has not participated in the final stages of this rally:
Next up, JP Morgan (ticker: JPM):
Finally, Citigroup (ticker: C, aka “Shittygroup”):
If the $KRX closes below 39 and JP Morgan and Shittygroup have high volume follow-through days to the downside tomorrow, the top is in IMO. If not, the bulls will have bought a day or two more. But make no mistake about it, now is the time to be fleeing the markets, shorting them, or resting comfortably in physical Gold and/or Gold miners knowing that any correction in the Gold sector is simply that. Do NOT chase Gold or Gold stocks higher here and please wait until this summer to put new money into this sector (unless you are scalp or day trading with tight stops).