HOME OF "PICTURES OF A STOCK MARKET MANIA"
February 22, 2012
Alan M. Newman's Stock Market CROSSCURRENTS
Alan M. Newman, Editor
Excerpts from our current issue
Rationales & Targets
Despite the excesses in sentiment, the technical picture does not illustrate overbought technical conditions. However, “overbought” is not a prerequisite for a reversal to commence. In fact, the more significant corrections or bear phases typically stem from the presence of negative divergences and on that score, we have plenty. For instance, while the NYSE enjoyed the rare circumstance of zero new lows on Friday, new highs on were less than half what they were when we last saw zero new lows in March 2010. There are undoubtedly extreme risks from a negative outcome in Europe yet at this juncture, it certainly seems a positive resolution has been factored into stock prices. Indeed, it appears that positive resolutions of all background circumstances are now factored into prices, which equates to maximum “risk on” and full exposure for participants. Simply put, the timing for a potential reversal does not get much better. The downside risk from here is at least five times the upside potential. Next step should be “risk off” and reduced exposures.
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