One of the ways to spot the end of a bear-market rally is to use the chart analyst’s “Three-Fan Rule”. Click on this SPY chart so that you can see it:
I have drawn three trend-lines in blue. The first two have been broken. If the third one breaks, then the bear-market rally will likely be over. The purple line I have drawn may turn out to be the neckline of a downward-slanting head-and-shoulders top. (Keep in mind that not all chart analysts draw their lines the same way.)
Today’s 0.44% rally was remarkably feeble when you consider how much money rotated out of oil and bonds today. In fact, it was less than half the historical average for such days, according to Jason Goepfert at SentimenTrader.com. Jason’s analysis shows that the S&P 500 should have caught a 1% rally on average.
If the speculative-bubble part of the commodity boom will now be ended by stricter regulation, where will the next bubble be? Certainly not real estate, probably not tech stocks again, but what about a Cash Bubble? We seem to already have a pretty big one going, and today’s market indicates that it probably just got a lot bigger.
[...] the SPY done because the “Three-Fan Rule” has been broken with today’s close. I wrote about this a few days ago. Try it yourself; draw three trend-lines on the SPY chart starting at the March low [...]
Stocks continued to fall lower on bank woes, an unwinding of the yen carry trade, and a lower price of oil. I recommend a short selling investment strategy, or a ‘dollar cost averaged’ investment in gold.