Blah! 

Yesterday was not a good day.  It wasn't that it went down very much.  It's that it did nothing to satisfy either the bulls or the bears.  The bulls lost a bit of money and the bears didn't get any significant pullback to help get to that next buying opportunity.  It was just a flat, blah day. 

Small caps and international stocks were the laggards as larger stocks again deflected any real damage.  Bonds were down slightly and the dollar rebounded some after Wednesday's big drop.

This year we've had a couple of catchy name "crash" signals including the Hindenburg Omen, and the Titanic Syndrome (which came close but never actually triggered a signal.)  While both were supposed to precede a major sell off, neither did.  But both did correctly forecast coming weakness.  Jason Geopfert at sentimentrader.com has found a new interesting trend, one which he is calling (tongue in cheek) the Chernobyl Prophesy.  So what is it?  

When the S&P 500 makes a new 52-week high, and on the same day new lows on the NYSE account for more than 3% of all issues traded, then you set off a Chernobyl Prophesy sell signal.  This scenario occurred on Wednesday.  So how bad is it?

Jason said that over the past 60 years, the Chernobyl Prophesy has triggered 7 distinct times.  Over the next quarter, the average maximum drawdown in the S&P was about 2.5 times the average maximum gain, with the average drawdown a painful -8.7%.  He goes more into details on his site but since it is a pay site, I better not give away the whole story.  See www.sentimentrader.com for more.  It's a great site and Jason is a master statistician.  I highly recommend it.

I will show one instance of this signal as an exaggerated example.  I'm using this one because it most resembles my projected scenario I have been laying out for the coming weeks...

                  
                          Chart provided courtesy of www.sentimentrader.com

In late1979 the market was flying along right through the holidays and into January.  Stocks looked invincible.  Then in early February 1980 we get the Chernobyl Prophesy sell signal.  The S&P 500 gets slammed for an 8.6% loss over the next month or so before another major rally started.  I'm really rooting for this as it would bring that next great buying opportunity that I have been promising for a few months now. 

There is no doubt that we are seeing a tug-of-war between some ugly intermediate term indicators and a technically solid market with a strong seasonal bias.  I would rather get a pullback out of the way, and the sooner the better, but this choppiness could be the best the bears can do until the holidays are over.  Betting against stocks the last week to ten days of the year is like trying to beat the casinos;  The odds strongly favor the house but occasionally someone beats those odds.

That's all for today.  Currently 100% F fund.  Thanks for reading.  Have a great weekend.