Curt Renz Capital Resources

BOOKSTORE

Updated Monday through Thursday evenings following market days

 

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Our commentaries are provided as general information and not investment recommendations.  You are responsible for your own investment decisions.  Our opinions are based on historical research and data believed to be reliable.  There is no guarantee that results will be profitable.  We are not responsible for errors or omissions.  We may hold positions in vehicles that are mentioned.

The popular averages were closed to the downside on Thursday, mainly due to selling during the final hour. The market drop that began last month is evidence that a growing number of people have begun fearing that despite jawboning, this could turn into a double dip recession and bring woe to those who believe we’re in a long-term bull market. The government deficit is horrendous, largely due to the bailout of banks. The liquidity that Uncle Sam provided to those banks while pressing interest rates to the floor would account for a large portion of the rise in 2009. Eventually despite Fed intervention short-term interest rates have to rise due to real market forces and the piper will have to be paid.

 

Above is the one-year chart of the S&P 500’s exchange traded fund. Early last year the price dropped to levels not seen since 1997. Then a bull market began in March. I became concerned by the latest move toward the upper (yellow) trend line staggering with little support from trading volume. Selling pressure has persisted during most of the recent sessions. A relatively brief bull market may have ended last month. The 50-day moving average has been forced to surrender. Nevertheless, selling pressure and fear have become so extreme that I expected the 200-day moving average to provide some support. So far it has held, and we may see another bounce attempt. But I don’t expect any rise to become permanent..