Why There Will Be a Sharp Stock Sell-Off Before May
By Toby Connor, Minyanville
The last bull ended when the leading stock, Google (NASDAQ: GOOG), entered a parabolic "bubble" phase. That was the signal that the bull had reached the euphoria stage. When the Google bubble popped it signaled the end of the bull market.
Two stocks, Apple (NASDAQ: AAPL) and Priceline (NASDAQ: PCLN), have been the leaders of this bull market. Both have entered the euphoric "bubble" stage. When the Apple and Priceline parabolas break it will almost certainly signal the end of this bull market.
Apple is now stretched 49% above the 200-day moving average. Anything between 50% and 60% above the mean is extreme dangerous territory.
The dollar is beginning its second daily cycle up in what could very well be a cyclical bull market. This should correspond with the stock market topping and the next leg down in the secular bear market.
My best guess is that we will see a sharp sell-off over the next two to three weeks, followed by a sharp rebound (QE3) that may or may not move stocks to marginal new highs, similar to the 2007 top.
The poor employment report on Friday is the first warning shot across the bow that the economy is slowing in preparation for moving down into the next recession/depression.
Fed Chairman Ben Bernanke is in the same position he was in 2007. Printing more money won't stop the collapse. It will only continue to spike the price of energy and exacerbate the decline.
Minyanville Editor's Note: Toby Connor is the author of Gold Scents, a financial blog with a special emphasis on the gold secular bull market.
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