Remember the LORD for it is he who gives you the ability to produce wealth and so confirms his covenant... Deut. 8:18

Friday, July 10, 2009

Major Crossroads: Buyers Exhausted

Last week, we saw more good news. Data showed American manufacturing was stronger than expected and the housing market is stabilizing. The S&P 500 was only able to rise a measly 0.4% the day this news came out.
Then on Thursday, the Bureau of Labor Statistics released the monthly unemployment report. It showed a large increase in unemployment. This news shook the stock market. It fell almost 3% that day.
The market's reaction to news is one of my favorite prediction tools. It's plain to me that right now, the S&P is shrugging off good news and responding dramatically to bad news. After a 44% rise in three months, this action tells me the bulls have exhausted their buying power and sellers have all the chips.
Now look at a chart of the S&P 500. The market has lost 8% in the past three weeks, after a huge run up, and the trend is clearly turning down. This could get ugly. (Daily Wealth's Tom Dyson)...

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