Thursday, 12 August 2010

STOCKS: The market breakdown has begun

No sooner did I submit my previous post than stocks jumped off a cliff and began a graceful swan dive. The S&P500 lost 2.8%, the FTSE100 2.4%...

My indicators are based on both shorter and longer term (daily and weekly) studies, and I only update the longer-term indicators at the weekend.  The eleven daily indicators, however, are now giving a resounding sell signal, by 10 votes to 1 (and the one which isn't a sell is neutral).

Unless the market stages a turnaround over the next couple of days the weekly indicators, currently on a buy signal, could also turn to the dark side come Friday evening.  However, I shan't jump the gun.

Although stocks could conceivably crash from here, what's more probable is a stabilization over the next few days followed by an attempt to recover next week.  Any such rally attempt should end by August 27th latest, when I expect US GDP reports to be revised substantially lower.  That announcement has every likelihood of panicking the markets into a major sell-off.

As soon as my weekly indicators become bearish, I'll post. Meanwhile, whatever else you do, don't buy stocks.