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Global Divergence

Rating: 4 votes, 3.00 average.
As the bulls stare at one minute tickers and irrelevant oscillators, the distribution of stocks at the global level continues to gather steam. Looking at the chart, GM has been in a downtrend since 0930 hours yesterday. Not a long term chart, but an observation. Why would GM along with some of the smartest minds in the world decide to IPO on any time frame than when they can obtain the max price for their free shares dumped to the public. My advice to anyone seeking to buy GM stock because of some headline or economist who was lucky enough to get 1,000 free shares at $30 is recommending it (and I know it's taboo to give advice)- Stay the hell out.

As for the insider exodus, I am a bit skeptical of insider selling this close to the end of once in a lifetime tax breaks and 2010 tax season, but it's very hard to disregard the tremendous insider selling pressure that has taken place the past 4 months.

For a primer on the divergences you can check out base metals, unraveling, breadth, and divergences. Basically, I'll sum it up like this: As a bull dies investors flock to the final few sectors or stocks still in uptrends. We saw this most recently in 2007-2008 with oil and gas stocks and right now we're seeing it in stocks like AAPL and LTD. Let's not forget the IPO of BX on June 19, 2007 which was supposed to be the IPO to end all IPOs as is GM. BX is a good primer into the dangers of headline investing as BX was also allegedly heavily subscribed.... by China.

We all watch the news and headlines but it's all how it's perceived by the markets. That's why even if you had tomorrows headlines, it doesn't mean you can make money of it. The market decides what it wants to do and the headlines follow. With that, lets take a look at some charts that have been talking to us for weeks now. (FYI: For breadth charts, specifically the NYMO, see coolhands blog. Note the NYMO currently lower than where it was at the August low.)

Here we go. First up, Real Estate. The market has gone up and is disregarding all the doomish housing numbers.... or maybe it is not disregarding that news.

Sol's Corner-iyr-png

Next up Greece. Ahh, Greece. What does it matter anyway, it's a bull market right? Kick save by the bulls delayed the H&S pattern which if it happens, could drop this index another 27%.

Sol's Corner-grdow-png

How about the Nikkei? The pain has been in progress for 6 months now as it appears their bear market has already resumed. It's a good way from those April highs....

Sol's Corner-nikk-png

A checkup on buying pressure. Volume up should be making higher lows here. Would you buy this chart?

Sol's Corner-upv-png

Alright, let's wrap this up. You didn't think I'd do a blog without mentioning the financials did you? We can't do it without the banksters, err, I mean financial industry. The divergence has only gotten worse. After M&T Bank bought out Wilmington Trust for a 40% discount, what do you think BAC, C, GS and JPM are really worth? Your guess is as good as mine.

Sol's Corner-xlfspy-png

Take care, and make sure you spend time with your family next week because at the end of the day, family will always be more important than any of this market stuff.

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Tags: divergence


  1. Unregistered's Avatar
    so in the "short term/intermediate term ...

    You are stating we are in a bear market and buyer beware. It probably is pretty obvious but wanted to make sure. The charts look pretty conclusive regarding the direction we are going.

  2. crws's Avatar
    A must read:
    Max Keiser: Crash JP Morgan - Buy Silver!

    “They have sold silver contracts that don’t exist. They engage in naked short selling. This is a form of counterfeiting.”

    The point of the ‘Crash JP Morgan Buy Silver’ campaign is to force JP Morgan to cover its negative bets. “There’s no way they can cover their liabilities if we all buy 1 silver coin and demand physical delivery,” says Keiser.

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