Research Excerpts

Lack Of Post-Earnings Follow Through Led The May-June Stock Market Collapse

Posted on: Tuesday, June 14th, 2011

Despite a very choppy, sideways-trading market since mid February, our more intermediate term analysis has consistently indicated that the US stock market was in the latter to final stages of its July 2010 advance.

This week’s failure of bullish chart patterns in both the US and Europe, corroborated by a new bearish shift in market momentum as of the close on Monday and further supported by a 53-year seasonal trend, indicate that at least a near term market peak is in place at the recent highs.

Paris CAC-40 Index

Considering that the US stock market is currently over-extended according to a number of different technical measures, we are expecting an initial, and potentially sharp, 7% decline in the benchmark S&P 500, back to major underlying support at the 200-day moving average.

Since that our May 17th report the S&P 500 has declined by 89 points or -7% to test its 200-day moving average on Thursday June 16th 2011.