Is this a bear market correction or a bull market correction? The market has rebounded nicely since March 2009, about 27 months. It appears to be running out of steam, as far as the volume is concern. Unless significant volume increase can support the next upside, it is unlikely there will be any significant upside, sideway at most.
However, should the volume shrink for the next few weeks, there is a high probability that the DJIA turning south. Any upside not supported by increase volume indicates a weak climb of fear. Once the steam stops, it will plunge down.
The second chart shows that the housing has about 20% downside to go. Las Vegas alone had dropped about 68%. The housing peak in 2006, and 5 years latter, they have not reached the bottom yet. Almost USD6.5 trillion of net worth in housing has been wipe off the planet (in USA alone). When the second Tsunami wave arrive, there is no way to run. This will hit the real economy as well, including the "financial markets," which think that housing had reached its bottom in 2009.
MyView
It is clear that the excess inventories in housing will wreck the economy again when it goes south again. Banks will get hit, another round. USA will face another recession and stagflation going forward. Looking at the first chart, we can see 3 tops, I do not believe we can see the next top for the next couple of years. Reduce your stock portfolio and focus on high dividend yield stocks, even that will not be a guarantee. When the Tsunami 2.0 hit, even high dividend yield stocks will follow the tides.
Wheat has dropped about 20% and oil has dropped about 10% over the last few weeks even when the main media talking about bad weather and wars in the MENA zone. What does it tell us?
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