Paranormal Activity to Another Black Monday?
by Zero Hedge - October 30th, 2009 11:35 pm
Paranormal Activity to Another Black Monday?
Courtesy of Leo Kolivakis, publisher of Pension Pulse, h/t Zero Hedge
Simon Maierhofer of ETFguide.com writes Whats Next – Minor Correction or Major Collapse?:
Over the past few months, every attempt by the bears to depress prices has been met with renewed buying pressure, resulting in even higher prices. What goes up, however, has to come down and some subtle signs are indicating that this decline might be more than a simple correction, much more.It was after midnight on April 15th, 1912 when the unsinkable did the unthinkable. Built and labeled as unsinkable, the Titanic was the most advanced and largest passenger steamship of its time.
Even though the Titanic’s crew was aware of the fact that the waters were iceberg-infested, the ship was heading full-steam for a destination it would never reach.
Being aware of danger is one thing; acting prudently for protection is another.
Today, investors find themselves in an environment that is infested with symbolic icebergs. For savvy investors willing to pay attention and heed warnings, this doesn’t necessarily translate into a financial shipwreck, while others might soon be reminded of the Titanic when they look at their account balance.
Iceberg cluster #1: Lack of leadership
Throughout the financial meltdown financials, real estate, and homebuilders fell harder and faster than broad market indexes a la S&P 500 and Dow Jones. Beginning with the miraculous March revival (more about that in a moment), the broad market rose while financials, real estate, and homebuilders soared.
Those three sectors led the decline and led the subsequent (mock) recovery. Since it is reasonable to assume that those sectors will continue to lead the market throughout this economic cycle, it behooves investors to watch such leading sectors closely.
The S&P 500 recorded a closing high on October 19th at 1,097. The Financial Select Sector SPDRs reached their closing high a few days earlier on October 15th. Since their respective closing highs, the S&P 500 has dropped 2.82%, while XLF has already shed 5.64%.
A more pronounced performance slump is visible in the home builders sector. The SPDR S&P Homebuilders ETF peaked on September 16th and has fallen 9.97% since. Keep in mind that XHB’s lackluster performance comes on the heels of the biggest monthly increase in total home sales in ten years.
Even