In a regular bull market the rise in share prices is backed by general growth in economy, wage growth, falling unemployment and all good things. In a bear market, it is the opposite. There is recession or fear of recession, credit is unavailable, unemployment is high and mood is gloomy. That is what fundamental analysis tells us.
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To best depict what we are currently experiencing in today's market, with the bullish euphoria that exists, the belief that European woes have passed, and that somehow it's different this time, let me point you to the movie clip below that comes from "Meet Joe Black". Here you have Good 'ole Joe and his lovely lady friend, being swept away by one another in a coffee shop. But like the market bulls, both parties are completely oblivious to what lies around the corner…
Is it any surprise that Mr. Market, Joe comes back as death himself?
All kidding aside, let me point you to the chart below, which is the basis for my belief showing extreme long-term resistance at today's highs. Notice that this is a five-year chart of the S&P and we are at a resistance level that in years past has been met with extreme selling.
Now, if we can break this level, which I am very skeptical that we will, then there is legitimate reason to believe we would be entering a new bull phase, but considering how overbought we are, how all reversal indicators point to a down turn in this market, I'm confident that we move lower from here, and that we have seen the market's highs already put in.
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Originally published on TheTechTrader.com.
One thing that the Fed and President Obama haven't fixed yet is the number of new home sales…they remain depressed at 2009 levels, as shown on the graph below.