Keep in mind that near a market top, investor confidence is high and the ‘buy now or you will miss it’ greed factor is very convincing.
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New York, NY (PRWEB) September 03, 2012
Since June of this year, the Dow Jones Industrial Average has gained about nine percent. Meanwhile, the S&P 500 and NASDAQ have gained about 11% each. Michael Lombardi, lead contributor to Profit Confidential, believes that there is a possible “triple-top formation” on the S&P 500 chart, which suggests that the key stock indices may head south.
In the article “Why the Stock Market Is Running on Nothing But Thin Air,” Lombardi argues that this is a bear market trap.
“A bear market trap lures people into believing that the economy and stock market are doing well so investors are enticed back into buying stocks,” explains Lombardi. “Keep in mind that near a market top, investor confidence is high and the ‘buy now or you will miss it’ greed factor is very convincing.”
Lombardi thinks that technical analysis would suggest that there is a triple-top formation in the S&P 500 chart. A triple-top formation is seen when the price of a stock, or index in this case, peaks near the same price level three times, and buyer interest is slowing following the third.
There’s also very little volume, which Lombardi thinks is important. “On Wednesday, August 15, 2012, the volume of shares traded on NYSE totaled 2.64 billion. This is roughly 29% below this year’s average,” notes Lombardi. “Stock market trading volume has been suspiciously weak all of August.”
Lombardi believes that the current rally looks to be running on nothing but thin air.
“Short interest has been rising sharply, the professionals are betting the market is headed lower,” claims Lombardi.
According to the Profit Confidential lead contributor, the rising short interest by commercial traders in S&P 500 futures is something that should worry small investors.
“Either these commercial traders are trying to protect their positions or they are simply trading the S&P 500 futures for gains,” he says.
“Since 2005, when short interest activity is greater than long interest, we’ve witnessed a subsequent downturn in the markets,” concludes Lombardi. “Currently, short interest is rising and long interest is falling.”
Profit Confidential, which has been published for over a decade now, has been widely recognized as predicting five major economic events over the past 10 years. In 2002, Profit Confidential started advising its readers to buy gold-related investments when gold traded under $300 an ounce. In 2006, it “begged” its readers to get out of the housing market... before it plunged.
Profit Confidential was among the first (back in late 2006) to predict that the U.S. economy would be in a recession by late 2007. The daily e-letter correctly predicted the crash in the stock market of 2008 and early 2009. And Profit Confidential turned bullish on stocks in March of 2009 and rode the bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009, to 12,876 on May 2, 2011, a gain of 99%.
To see the full article and to learn more about Profit Confidential, visit http://www.profitconfidential.com.
Profit Confidential is Lombardi Publishing Corporation’s free daily investment e-letter. Written by financial gurus with over 100 years of combined investing experience, Profit Confidential analyzes and comments on the actions of the stock market, precious metals, interest rates, real estate, and the economy. Lombardi Publishing Corporation, founded in 1986, now with over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more on Lombardi, and to get the popular Profit Confidential e-letter sent to you daily, visit http://www.profitconfidential.com.
Michael Lombardi, MBA, the lead Profit Confidential editorial contributor, has just released his most recent update of Critical Warning Number Six, a breakthrough video with Lombardi’s current predictions for the U.S. economy, stock market, U.S. dollar, euro, interest rates and inflation. To see the video, visit http://www.profitconfidential.com/critical-warning-number-six.