Como se combate o populismo? "Com eleições", responde Fukuyama

[Luka!]

PESSIMISMO OU REALISMO ?

5 Reasons That Point To A Selloff
Thursday December 29, 9:32 am ET
By Rob Hanna


Go to www.TradingMarkets.com to get your stock's PowerRatings.
As I do at the end of each month, here is a run down of some of the things I'm seeing in the market.

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Positive

Foreign Markets - Foreign markets have generally remained in good shape. Japan, India, and Russia are a few of the leaders. Unfortunately, their strength hasn't carried over to the U.S.

Negative

Accumulation/Distribution - The price and volume action over the last few weeks has been bad. The market has risen on light volume and declined on heavy volume. This is an indication of institutional distribution. On top of this, notice the number of black (or red) candlesticks on a chart of the (AMEX:SPY - News) or (AMEX:QQQQ - News) over the last month. Since 11/25, the SPY is only down a little over 1%. Yet during that time, there have been twice as many black candles as white candles. Institutions have been gapping the market up in the morning so that they can sell it off during the day. The big boys are unloading stock on the unsuspecting public while artificially propping up the market. This kind of action is many times seen near tops.

My shrinking watch list - While some new stocks have been making it through my scans and setting up in basing formations, there have been a larger number that have seen there bases fall apart. This is a negative as it signals that there are not a significant number of stocks that are prepared to lead a new rally.

New Highs vs. New Lows - Breadth has been lousy. The rally that began in October was unable to generate significant breadth numbers and the last few weeks have done nothing to help this. The market has remained afloat thanks to a few large caps. This is evidenced by the underperformance of the Nasdaq and the Russell 2000 versus the S&P 500. Incidentally, the performance of all indices has historically been better when the Nasdaq leads the S&P.

UUWNHI (Unofficial, Unscientific, Working / Not working Hanna Indicator) - The biggest focus here is the fact that breakouts have gone nowhere. Breakdowns on the whole haven't fared a lot better, as the market has been drifting more than trending. This means there is no leadership. It also means breakouts are not generating any real excitement. In a strong intermediate-term trading environment it is not unusual to see numerous stocks move up 10%-20% within a few days of breaking out. This just isn't happening. The rewards aren't there. Therefore, the risks probably aren't worth taking. Should the market head lower as I suspect it will, then I believe the most opportunities will come from big picture topping patterns, rather than breakdowns - at least in the early stages of the decline.

Sentiment - Several measures of sentiment are just too bullish right now. We may need a bit of a market correction to alleviate this condition.

Summary

The market looks very toppy. Bad breadth, poor follow-through, distributive action, and overly bullish sentiment are all pointing towards a selloff. I would be surprised if it began in earnest before 2006, but I believe we will hit a rough patch in January. The market has been in neutral for nearly two years now and the upcoming selloff could be just the medicine it needs to launch the next leg higher. Not to get too much ahead of myself, but I believe the upcoming rough patch will prove to be just that, a rough patch. Once through it, I expect the market will rally strongly in 2006 and good traders will enjoy the ride. More on that next weekÂ…

Have a wonderful New Year!