Friday, April 17, 2009

Bear Market Rallies

The scatter chart shows just how stretched this rally has become. At yesterday's high this was the third largest bear market rally in history. (I've excluded the 50% rally out of the 29 crash).

Many of the sentiment indicators are now at or above levels last seen at the May 08 and Jan 09 tops.

Breadth in just about every sector, especially tech, is stretched higher than it was at the 07 top.

Miners on the other hand are working off the bullish sentiment from the 100% gain out of the Nov. low. Breadth is now back to levels that have signalled bottoms in the past.

The XAU has broken down out of the coil. As I pointed out the other day the odds are now 70% that this will be a false break. The true move will most likely be in the opposite direction. This move should be much stronger and longer lasting than the initial break.

On top of that gold should be only a few days from a cycle low. The stock market on the other hand should be only a few days from a cycle top if it hasn't already made it.