We hit the Weisenthal Top on Friday, June 12th, two trading days after Joe announced the rally begun in March had hit its top. A week after the market started declining, the Wall Street Journal has now chimed in with a top of the fold, front page story announced, more or less, that the market is getting ready for a slide.
“Is The Bull Run Pulling Up Lame” The Journal asks. Here’s the evidence:
- Stocks aren’t viewed cheap. Stocks are no longer cheap by historical standards, having run up 40% since March. “[H]istory would suggest we would get a 5% to 10% correction somewhere,” Linda Duessel, market strategist at Federated Investors in Pittsburgh, says.
- Less bad news is no longer good news. Remember back when the smallest second derivative improvement could spark hope, talk of green shoots and thoughts of a recovery? Those days are gone. As the Journal puts its, “investors are no longer impressed when the economic news is simply less bad than before.”
- Weak trading volume. A market prepared to continue skyward often pulls in more investors, driving up volume. That’s what happened in March, when average daily volume for all New York Stock Exchange stocks hit a record of 7.21 billion share. But almost immediately the volume began slipping, suggesting widespread scepticism about the rally. Volume sunk to 6.42 billion in April. For June it is running at 5.14 billion.
- A Narrowing Rally. “The number of stocks joining in the gains has begun to shrink, which doesn’t typically happen this soon in a real bull market,” the Journal writes.
But, then again, maybe this kind of story marks precisely the kind of downturn in sentiment that signals we’ve hit the bottom again. Aren’t news reports supposed to be contrary indicators? Maybe. But it sure seems early to have hit the bottom after a 40% rally.