Fear Will Dominate Until Until the Weak Hands Have Been Culled

Technical analysis (TA) is a skill of subjectively. As a result, TA is characterized more as an art form and methodology.

(1) Follow the money

(2) Follow the secular trends


Is the stock market poised for a significant decline, or as you suggest ready to fall off a cliff? Connected money is flowing in equities. The nominal trend, due to currency devaluation, is up regardless of the general economic activity.

From a US Dollar, technical perspective, the market continues to consolidate above the April 2010 downside gap. If past resistance becomes support, the base building process will begin. Also, market internals, such as ADN(E), not only lead the breakout above the April 2010 highs, a positive divergence, but also continue to press to higher highs. ADN(E) as well as other internal measures suggest building trend energy. See charts below:

S&P 500 ETF:


NYSE and Market Internal Measures:


None of this analysis really matters over the short-term. The herd has been spooked by fear. Fear will dominant until TIME is right and the weak hands have been culled.

HI Eric,

In your most recent article just sent, you discuss connected money flowing into equities. The S&P chart looks like it's ready to fall off a cliff, I take you the connected money is shaking out weak hands and they plan to run it up afterwards? Just want to know if my thinking is right here...

Thanks

Amir