Market angst regarding a potential September turnaround appears increasingly to be penetrating the investor psyche — that’s despite recent proclamations by even long-time bears like Krugman and Soros that the current rally could indeed be the genuine article.
The Pragmatic Capitalist blog, for example, draws our attention to the following chart:
As the blog notes, volumes have been swiftly descending ever since the onset of the summer rally. This, according to Tony Cherniawski, chief investment officer at the Practical Investoris, is at odds with the makings of a genuine breakout:
In a normal breakout you get rising volume. In this case, we had rising volume for a while; then it really dropped off last week,” said Cherniawski, who ascribes the recent rise in equities to “a huge short-covering rally.
The Pragmatic Capitalist also notes some other concerning characteristics:
The 50% move in the S&P 500 has exhibited many of the characteristics of a secular bear market rally:
* It has been on declining volume.
* It has been very low quality in terms of asset gains.~
* There is very little real leadership outside of technology names.
* And perhaps most importantly, the move has been very swift.
Related links:
HAS THE NO VOLUME BEAR MARKET RALLY ENDED? – The Pragmatic Capitalist
Mirror, mirror on the wall… where’s the market come this fall? - FT Alphaville