-- Posted Friday, 12 October 2012 | | Disqus

Beneath a façade of tedious price action, U.S. stocks appear to be weakening by the hour. Yesterday, for instance, the Dow couldn’t even muster a 100-point boost on news that jobless claims had fallen by 30,000 in the week ended October 6. Earlier this year, before our perennially recovering economy encountered some stiff recessionary headwinds, that stat would have been worth at least 150 Dow points on the opening. This time around, though, DaBoyz could milk only a paltry 84-point gain from it. When a second-wind flurry of buying failed to drive the blue chip average any higher, it was time to unload. We said so in the Rick’s Picks chat room at the time, noting that the rally felt “doomed,” as it indeed was. Have investors finally figured out that virtually all employment-related statistics, especially so close to the election, are economically meaningless at best and brazen lies at worst? Even if they have, it would hardly have mattered. Since early in 2009, and up until recently, any item from the Labor Department that was other than catastrophic has been seized upon by institutional traders to stampede bears into short-covering. As we’ve pointed out here many times before, that’s the only kind of buying powerful enough to push stocks through levels of supply or to jolt shares from doldrums. Now, this effect appears to be dead, or at least dying.

From a technical standpoint, there are disquieting signs of distribution as the Industrial Average and the S&P 500 Index hover within striking distance of new all-time highs. With breadth deteriorating on rallies and S&P insider selling at flood tide, leadership has gone flaccid as well. Several key bellwethers that we monitor very closely and trade, notably Apple, IBM and GE, have all turned lower without having achieved their respective “Hidden Pivot” rally targets. We had been looking to short GE at 23.70 by buying put options, but the stock went no higher than 23.18 before turning south. As for IBM, although our proprietary technical tools identified a potentially important top at exactly 215.59, our short offers were temporarily widowed when the stock took a nearly $7 header after topping a week ago at 211.79. Apple, meanwhile, has become a drag on the averages rather than leading them higher. Is the stock just taking a breather? It’s possible, since the long-term charts suggest that the stock’s 10% selloff in recent weeks might be nothing more than a healthy correction. Even so, because bells are unlikely to ring when the long-term bear emerges from a 43-month hibernation, we are trading with a bearish bias and monitoring the lesser charts closely for signs of stepped-up selling. When investors finally rush for the exits, we expect the Dow to shed 2500 points in perhaps three months Bulls will get what they deserve, but there’s no reason why bears who understandably have been bored to complacency should suffer the same fate. Want to receive real-time alerts when opportunities are ripe or danger signals flash? Click here for a free trial subscription.

-- Posted Friday, 12 October 2012 | Digg This Article | Source: GoldSeek.com

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