The major averages pushed higher in a continuation of their correction off the March 6th lows. We are now in week 8 of the rally and some negative divergences are beginning to take shape. The Nasdaq has advanced in all 8 of those weeks. It has proven to be the market leader as I expected it to be in a March 3rd article.
The reason for the Nasdaq's outperformance is simple: debt. The major components of this index have less of it. So investors have been targeting these companies because they know their common equity will not be eroded to zero in an effort to refinance or liquidate their debt. Contrast that with the flailing financial sector who are now negotiating the results of the stress tests with the government (you can't make this stuff up, folks).
Among those major components to the Nasdaq are names like Google, which appears to be challenging an important resistance level between 390 and 425. I will be watching these major Nasdaq components for evidence of exhaustion. Once the market leaders start to fail, we will know the rally is reaching its conclusion.
Crude oil has been holding at support around $47. It appears ready to target its higher time frame moving averages. The 200day, 200week, 100week and 50week Exponential Moving Averages all reside in the $65-75 range. I expect a visit in conjunction with a higher push in equities.
I also wanted to briefly touch on this swine flu "outbreak" that seems to be grabbing much of the media's attention. To me, it appears to be way overhyped for what it actually is. The Flu regularly kills 30,000 Americans per year - 100's of thousands of others die around the world. Often, one strain will kill thousands by itself before mutating itself into something far more benign. So why is this such a big deal? When something as normal as the flu is advertised by the media as the "Greatest threat to humanity," alarms start going off in my head. My internal BS meter redlines.
As is usual in any fear campaign, governments are using this latest episode to their advantage and making power grabs all over the place. And de facto branches of government (the major corporations - in this case the drug companies) are going into overdrive to lobby government for favourable grants or contracts to save us all. "Mandatory vaccinations" they scream.
I don't believe any of it. It all looks like a coordinated fear campaign manufactured to scare us into giving up more of our personal liberties and to enrich a few special interests. I'm not a doctor or a microbiologist, but when one smells BS there is often BS in the area. This wreaks.
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