Daily Market Snapshot 05 04 2012

Daily Market Snapshot 



Green is good - Red is Bad

Market Direction Model

The MDM is flashing warning signs again. Lots of red on the bottom row.
Green is bullish - Yellow is nuetral - Red is bearish

The catalyst that triggered today's sell-off was the government employment report. The market was expecting 160,000 new job creations and we only got 115,000. A higher number would have confirmed better growth prospects for the economy and a lower number would have put pressure on the Federal Reserve to reinstitute monetary expansion with another round of quantitative easing (printing more money).

While not too hot - not too cold was fine for Goldilocks, it was not well received by the market. 

The right side of the MDM is starting to look like a Christmas tree, with alternating swaths of red, yellow and green. What is this telling us? It is revealing the current indecision on the part of investors. At the moment the market is news driven and the news can be unpredictable. Next week the spotlight will be on Europe and the French elections. Recent market action is disconcerting and is telling us we should take a more defensive stance right now.

It is often helpful to look back to see where we have been in the market to better gauge where we may be headed next. The rally that began on Dec.19th 2011 has run out of steam. The market is now going sideways in a very choppy manner. Will it chop around like it did last fall and then begin a new leg up? Or, will we experience a bear move to the downside like we had in August 2011? I don't know. The best we can do is to continue to rely on the same tools and methods that helped us avoid the 19%+ decline in Aug. 2011, the May 6th 2010 Flash Crash and the 2008 Bear market. 

For now the High Road Scenario I laid out in the May newsletter is being rejected.

Trendline Analysis

For the Nasdaq Composite Index

Aug 2011 - Present

Click  on the chart for easier viewing

This blog post does not constitute an offer of investment advice. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.