Marketview: Lost Steam

Lost Tracks of Time

The environment has changed and adding risk is no longer favorable.

The most hated bull market of all time ISN”T OVER but lots of warning signs are flashing that we are due for a serious correction. Even the most bullish would rather avoid serious broad market corrections, right? For reference to a correlating event, take a look at my post from 2012 here: http://www.dynamichedge.com/2012/04/17/darkness-is-spreading/.

Here’s some of what I’m seeing.

Volatility has exploded in the small cap sector. The Average True Range for the small cap sector broke out to levels not seen since 2012:

IWM-ATR-volatility-may-7-2014

The correction in the market has so far been contained to technology/biotech/small cap stocks. However, large cap stocks are now showing signs of weakness, as well. Here is breadth for the large-cap $OEX index:

oex-breadth-may-7-2014

Here are the advance-decline securities line. Pretty anemic:

ushl-may-7-2014

MAMOx, the chart which we hold dearly (or in complete contempt) signaled a throw-over top had completed early March by turning bullish after a 100+ handle rally. Has now flipped bearish and remains below the zero line:

MAMOx-bearish-may-7-2014

On the flip side, the same thing that has driven this market higher for the last several years (latent bearish sentiment) is still in ample supply. Many times the only reason to rally is that there is no one left to sell:

bearisk-sentiment-may-7-2014

Good luck out there. My apologies for not posting regularly. Life changes when you have kids, let me tell you!


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