Apr 13

Weekend Outlook for 15th April 2013 – Bounce done – correction to resume

When I’m saying bounce done and correction to resume , I’m not talking about Dow Jones and SPX because they still make new highs and ignore rest of the world.

If we look at small caps RUT , Semiconductors SOX , Oil – Copper, and European markets like DAX – everyone of them still below their highs mid March where they topped out.

This week bulls had a great week for a bounce and if we look at SOX and RUT we made a 100% perfect backtest of broken trendline since 2012 lows which confirms that a downtrend have begun.

If we look at SPX and Dow Jones they are however ignoring everything including all kind of macro factors out there which does not support the view of a rising markets.

However as manipulated the markets is this is where we stand. If we look at Dow Jones Weekly chart is is EXTREME overbought and usually when we are this overbought it can get more overbought like it has , but WHEN it goes down it will usually be a MUCH bigger decline as the longer we stay overbought the more we will fall when we start to fall.

1. VIX filled the gap perfect at 12 on Friday suggesting that a bottom might be in on VIX before higher levels again.

2. TLT bonds looks ready to rally higher as called this week bonds to take off again and this is risk off for markets usually.

3. SOX looks like a perfect top hs pattern and should sell off in coming weeks from here. SOXS will do great if true.

So for this week: The STATISTICS out there is calling for a GREEN MONDAY – which means markets very well could see a rebound after the little move down on Friday , so we might start going green but I expect overall this week to start more of a sell off and continued sell off in RUT and SOX. So even if we would hit 1600 or tag this before selling off on Monday I would remain bearish for the near term in stock markets. That is at least what small caps RUT + EU markets + oil, copper, and semiconductors are telling me.


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