We are seeing exactly what happens at major market tops. It doesn't just turn south and go down. Those are swing high/low actions. What happens is that it fights to keep going. But sellers quietly start to jump in giving you those hangman candles. But still, the market comes back. But each time, it gets weaker and weaker, just like it is now. Soon, 'they' will realize that buying the dips is useless. Then the market will slowly roll over and begin a quiet decent. That slow decent will then start to quietly break support levels which then will turn into a cascade. Just watch.
It's almost textbook.
Now, here is what the problem is for the market on a fundamental level--- In March of last year at the low, the SPX combined EPS was expected to be around $50 per share. Multiply that by a bear market PE of 12 and you get 600. But when Bernanke flew to the rescue and threw the kitchen sink at the problem in March, all of a sudden the expectations changed and everyone realized that no longer could you assume the worst in terms of EPS continuing to fall. So, with all the expected stimulus/fed money coming in, 6 to 9 months later from last March you had to assume at least a $65 per share for the SPX. Raise the multiple to 15 and you get a target of 975. So it was safe to go all into the market, which many did.
Now, the EPS has come in around $75, multiplied by 15 you get 1125. The hope for many money managers who survive off the commissions by clients is that the EPS keeps growing. But clearly now with all the talk of VAT taxes and the Bush tax cuts expiring, no way. So, the market here should begin to discount 6 to 9 months out.
What will it be.
AI
