Wednesday, March 4, 2015

Flight of the Black Swan

The Market Trend Model (http://bitly.com/M_Trend_Model) is beginning to move to a negative bias as last week's selling has continued into this week.  Distribution days are stacking up with the Nasdaq count at 3 and the S&P 500 count at 3.  The Russell 2000 has not printed a distribution day since February 9, but it has fallen below its last accumulation day on March 2. And more importantly, today's selling in the S&P 500 signaled a possible trend change for this index and lower prices appear to be on the horizon.

As the roaring bull market from the March 2009 low enters into its sixth year, it would appear the stock market indexes are much closer to a top than an area where one wants to "buy with both fists."  I warned here on Saturday that subtle cracks in the market were beginning to show and fear was creeping into the market.  The first Market Trend Model component to break down was the NYSE advance/decline volume, indicating the breadth of the market advance was deteriorating.  Today's market action saw further deterioration in price, momentum, and volatility indicators.

It is my belief 2015 will be the year of black swans with the well-gushing supply of crude oil being the first black swan to take flight.  Other potential black swans could be related to Federal Reserve Policy, a Grexit, Middle East conflicts, a terrorist attack on the U.S. mainland, and who knows what else.

For anyone who lived through the oil crisis in the early 1970's, it is hard to believe the world is drowning in oil and rapidly approaching the point where there will be nowhere to store the stuff (http://ow.ly/JX2DU).  The increasing supply of oil seems to call into question market pundits who say the oil price collapse is all about production and nothing about demand.  It seems to me that demand has fallen off the proverbial cliff due to a slowing global economy.  Can falling stocks prices be far behind?  And what kind of central bank shenanigans will occur if the stock market begins a truly serious decline?

Today's video has some great historical footage and a great sound track...enjoy!