Unless third-quarter earnings are strong enough to get institutional investors buying aggressively, I think the stock market is vulnerable to a correction in the very near term.
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New York, NY (PRWEB) October 16, 2012
Profit Confidential, an e-letter produced by Lombardi Publishing Corporation, a 26-year-old consumer publisher that has served over one million customers in 141 countries, cautions that, despite the optimism surrounding the recent rally in the S&P 500, investors should not overlook the market’s ominous warning signs.
In a Profit Confidential article, financial expert Mitchell Clark states that, viewed through a narrow lens, the S&P 500’s rally has been strong, up 13.6% year-to-date, and on track for its best yearly run since 2009. In fact, he says, some bulls see the rise of the S&P 500 continuing into next year and surpassing recent highs.
That said, the selloff on key stock indices over the past week has resulted in some interesting technical developments, according to Clark. After four months of advancing, the S&P 500 recently moved below its tested support line, suggesting a breakdown and change in direction.
“Unless third-quarter earnings are strong enough to get institutional investors buying aggressively, I think the stock market is vulnerable to a correction in the very near term,” warns Clark. “I’m worried about how the S&P 500 Index looks, as well as certain market leaders. Apple in particular is breaking down. Its recovery will be the key to future economic advancement.”
Viewed from a longer historical perspective, the S&P 500 is signaling further caution, states Clark. He explains that the S&P 500 has been slowly forming a head and shoulders pattern since 1995. In 2000, the S&P 500 hit 1,527.46—the left shoulder; in 2007 it hit 1,561.80—the head. The right shoulder formation is ominously near completion. The question is: will the shoulder fall to the downside?
A number of analysts think the S&P 500 will continue its bullish ways; Clark is not one of them He thinks there are a number of significant indicators that point to the opposite. “The overall economy has not responded to economic stimulus. Inflation adjusted income has fallen, more people are on food stamps, the dollar has declined, and some bellwethers are projecting negative guidance.”
Clark concludes, “The other major stock market indices don’t look as ominous. But as the most representative index among large-cap companies, the long-term trend in the S&P 500 looks downright scary to me.”
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