Monday, April 28, 2014

No correction after all

The stock market has actually rallied back since the April 10 "day of panic", and the S&P 500 index only managed to fall 4% below its recent all-time high before recovering, so we didn't have an official correction.  As of this afternoon, the S&P is only 1% away from returning to the April 2nd high mark of 1890.

Short-term indicators are still bearish, as the recent market action was not sufficiently scary to panic traders.  I expect another real correction (> 5%) to manifest sooner than later.

The long-term prognosis for the stock market is also unfavorable.  According to seasonal cycles, the expectations for the next six months are as bad as they can be.  In addition, a new measurement of "market health" that will be part of the Version-2 MarketBots indicates that conditions are favorable for a crash of 20% or more.  In other words, if I see a pre-crash signal in the next few months then I'll sound the alarm without hesitation.

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