Saturday, June 13, 2009

Stock Rally Severely Exhausted; June 13, 2009

The stock market rally is severely exhausted. The market cannot push higher over the past week, breadth continues to deteriorate, the small cap and tech indices are showing more weakness than the blue chips suggests people are exiting their "risky" assets, momentum indicators did not confirm the recent high in the stock market and several other indices did not confirm that high in blue chips. Usually when the market closes with NYSE breadth negative and the Nasdaqs and blue chips are mixed up and down it leads to a sharp decline shortly after. Well not only did we have that action occur Friday, but it's happened 3 times in a little more than a week! Again, this fractured non-confirmation failure to push higher is signs of extreme bullish exhaustion.

I still await a strong break of the trendline and ultimately a break of that 5 wave rally on Thursday which I feel was an "ending move". Once this occurs, we can be all but assured that a significant top is in place.

I'm short 65% total strength with the SDS (ETF) and a small bear put spread on the SPY.

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