Sunday, May 29, 2016

MEGA Crash From All Time Highs: Base Case Scenario

Contrary to Barron's assertion, the last time stocks crashed was last August, when Dow futures were Limit Down at the open:

China was devaluing their currency

Oil had finished its Spring rally at the end of May

Market breadth was weak

The Fed was preparing to tighten

Global markets were in RISK OFF mode

Volume and volatility were extremely low

What's changed? Nothing.

EXCEPT, now technically the market is far weaker. Relentless sector rotation has concluded with Defensive/Recession stocks, which are now rolling over.

And of course short-covering:

The highest yielding dividend stocks just made an overthrow high...

August is circled:

Major divergence

S&P 100 ETF
The largest stocks by market cap with price momentum oscillator:

Equal weight/cap weight S&P:

EM Currency