My Chart Diary: March 2012

Thursday, March 29, 2012

Divergences finally gaining traction...

S&P right now: 1405

I believe that this market has made a very important Technical Top. The above charts are just a handful, but they all tell the same story...that the market internals and techicals topped back on February 6th. Yes, market indexes have made higher prices since, but the internals are unhealthy. The Generals or the Big Blue Chips are carrying the indexes higher...almost alone. The 2nd chart really speaks to this...the Equal weighted Nasdaq 100 is making a NEW LOW against the Market Capitilization Nasdaq 100! Another words, there are very few stocks making new highs and acting well. The Broader market Wilshire or 5000 stocks is Well off the highs against the mkt capitilization S&P 500. It's like pushing a heavy piano up a flight of stairs...each step becomes more and more difficult...

I believe that we've seen the technical TOP of this Cycle...HOWEVER price tops can take significantly longer, which means we still could make another marginal higher high like 1430,40 or 50 on the S&P. At this juncture the internals should be even worse than the last month and will be the OPTIMAL time to exit ALL longs and enter Short positions aggressively. We are in the late innings of this rally so each incremental percentage gain on individual stocks will become more difficult and risk/reward ratio is huge here...I don't like to try and earn 1, 2 or 5% when I see 15-40% downside in the offing...be careful out there, exiting longs is the absolute prudent thing to do here...

If you've participated off the October or November lows and earned +20-30% in 5 short months how can you not be happy with that?!?! The worst thing that could happen is that you miss out on some more upside...BIG DEAL! You've earned 20-30% already, and may miss out on 2-3% more upside...and if this does not prove to be a top...I promise there will be another chance to get back in!! But when this cycle ends...those 20-30% gains WILL evaporate Very very quickly....be smart, be the house not the gambler...take gains!