What Kind of Top will this Be ? with update………….
We have have talking for sometime about the roll over top that we expect in stocks in the May – October period. When one is in the middle of this type of scenario you always are watching the indicators to see how this actually plays out.
Obviously we watch our “NUMBERS”. The trading indicators have made a few changes since our last posting, but the important macro indicators have not had a change since our last posting of the numbers, although a couple are getting close. We will probably post those numbers tomorrow.
At the moment the most important market relationship is the T-Bond / S&P 500 ratio. So far on this Stock market decline from the May 22nd high, the decline for the T-Bonds has been greater than that for stocks. This is probably due to the FED stated premise that a stronger economy is what is pushing interest rates higher and that higher interest rates will push stocks lower. One part of this being a trading top requires indications that the economy is not as strong as the experts currently state. This kind of scenario, probably sequestor based in late summer, would provide a FED back-track and a push higher on T-Bonds. In the current mind set of the market, a move higher on T-Bond prices would take pressure off stocks in the short-term.
In the meantime we remain, long the Dollar, short Stocks, and neutral in T-Bonds and Gold.
Update: With the low on the S&P’s at 1560 today, 4 points from the 1556 expected trading low this summer, our trading accounts cut their short stock positions by 50 percent.