Comment: Having completely missed March 2009’s important low we are hoping for better luck when picking tops. This month for some, and building over the last four for others, equity indices are showing signs of instability. Most of these had already retraced between 50% and 61% of the declines from peaks in 2007 to March 2009, a few almost recouping the whole of the drop (Brazil, India and Turkey), while a handful hardly bounced at all last year (Middle East). The S&P 500, after inching to 1150, its highest level since October 2008, lost 5% so far this month. It has formed a weekly ‘bearish engulfing’ candle, closed below the 50-day moving average, and has potentially a ‘spike high’ and another ‘bearish engulfing’ candle on the monthly chart. For confirmation we must wait until Friday, and after that we would be looking for a series of small bearish signs to add weight to this view, and for long term momentum to turn bearish.
A monthly close above 1150 would force us to review.
