As I Tweeted near the close on Friday, several markets showing greater technical damage are biotech (BRK) and drugs (DRG).   The SP500 Index dropped below the 50 day moving average.  I said: SP500 Index is closing above the low for yesterday but below 50 day moving average. Mixed picture, but not a trouncing. SPX SPY 

In fact, the SP500 is just barely below the 2011 high of 1370.58 on the close of get this – 1370.25.  Think the market responds to technical signals?  Commodities continue to weaken.  Copper is still making lower lows.  This would suggest that the economy is slowly weakening worldwide,and the markets know it.

Continue to follow the reactions to earnings.  The reaction to the bank earnings was admittedly a bad one.  The reaction to Alcoa was very positive.  And yet, the banks (BKX) did not break their 50 day moving average on the close despite the big downdraft on Friday.  China (FXI) was down a miniscule 0.08% following the “bad news” Friday that Chinese growth has moved down to 8.0% from 9.0% over the past few months.  The VIX did not make a new high.  Small caps should have broken down much more but did not as I also tweeted:

That means the sell-off need not find its next leg down immediately at least.  I favor a move back up at least to a slightly lower high for the SP500 Index followed by a potential second down leg.  Sentiment is getting more Bearish which of course is potentially Bullish although there is room for one more move down in sentiment before it starts to become extreme.  So yes, the Bears have their arguments, but the Bulls have a bit of an edge still.

If you have not seen them, have a look at the charts from this week as well.  They are listed on my “feed page” here:

Market Timing Chart Links Here

Enjoy your week!

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

Since then, the markets have indeed rallied.  There may not be much more upside until the next leg down resumes, but the market has surprised the Bears and has gone to Bullish extremes repeatedly.  The above is the text from the 4-15-2012  “Weekly Wall Street Sun and Storm Report™.  To see the current issue and this week’s ratings of all 35 markets I follow and receive the newsletter every weekend, subscribe here: 

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