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Jonathan Yates
Ugly Technical Picture Developing for the Stock Market

The carnage this week in the stock markets has generated a very unpleasant technical picture, with the long term performance of two key commodities also raising doubts about the outlook for global economic growth.  Both the NASDAQ and the Standard & Poor’s 500 Index broke through in a downward vector important floors.  For the Standard & Poor’s 500 Index, is was the 1551 floor.  For the NASDAQ, it was the 20-day Bollinger Band at 3175.


This week has featured a 3.0% plunge for the markets.  Should the  S&P 500 finish below 1551 and/or the Dow below 14,600 for this week, the bulls could be in full flight.  There is plenty to support that directional shift.  Decliners today outnumbered gainers by 55-38%.  More than 60% of stocks finished below their fifty-day moving average.  Almost 20% more stocks hit a new low than reached a new high.  Those looking for an end of the week rally tomorrow are confronted by bearish sentiment of over 60% and bullish sentiment at barely 30% registering at the final bell.

Going to the exchange traded funds reveals a short float of 13.96% for the DIA.  For the SPY, the short float is 32.09%.  The QQQ has a short float of 11.24%.  A short float of 5% is considered to be troubling.

The GLD was up more than 1%, as gold returned to its role as the traditional safe haven investment.  What should worry investors with a long term outlook is that the JJC, the exchange traded fund for copper, is down for the last week, month, quarter, six months and year of market action.  For 2013, the JJC is off by 13.31%.  If the economy were looking strong, the JJC should be soaring as it is used almost entirely for industrial purposes in pipes, wires, cables, etc…  The exchange traded for oil, the USO, has the same trajectory as the JJC…very disturbing for long term investors.

The chart below shows the weaknesses in the JJC and the USO, which is very bearish for economic growth.


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