The Market Looks Eerily Similar To The April Top

On the surface, the market and surrounding conditions look eerily similar to the April top.

The S&P 500 is falling back short-term from the same level, breaking below the support at its 21-day m.a. for the first time after a similar two and a half month rally began, with the market being spooked by the return of worries about the debt crisis in Europe, and with investor sentiment as measured by the American Association of Individual Investors at high levels of bullishness and complacency. (The AAII poll reached 48.5% bullish at the April top, and was at 57.6% bullish in its latest report last Wednesday night).

sy harding

But there are differences too, the biggest of which is the new round of quantitative easing by the Fed.

So the important aspect for investors is not the short-term charts are showing, but what the intermediate-term technical indicators are saying.

However, it’s also interesting that 1228 on the S&P 500 was a Fibonacci 62% retracement of the 2007-2009 bear market.

sy harding

Photo: Sy Harding

That’s a level where institutions may start pulling out of equities, just as bullish individual investors start piling in, and trading volume in Tuesday’s sell-off was 30% higher on the NYSE than the average of the last several months.

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