Mark Leibovit has been bullish the Stock Market for awhile, and if you’ve been following his Platinum trading service, it certainly hasn’t hurt him to have been Bullish.
Now, that the S& P 500 has sold off 50 points from its recent high of 1380, Mark thinks we are at an crucial juncture. Specifically, the two previous 50 point selloffs from the June10th and July 3rd S&P 500 peaks have defined a clear line at 1330 (it touched 1329.24 today then rallied). If that line at 1330 is broken with authority he thinks that will signal that the S&P 500 is heading down more than double the previous corrections. Or another fat 63 points to the June 4th low of 1267 “and possibly well beyond” . No wonder he’s warning about a potential for a big decline. Just a quick glance around and you’ve got Ben Bernanke’s talking before Congress about the Fiscal Cliff the US is facing, while any one of 3 major European countries could plunge over a Fiscal Cliff in the blink of an eye. “We could be looking at another ‘Flash Crash‘ type scenario” – Mark Leibovit
(Mark continues below the chart).
A bit more from Mark on the market’s health:
“Volume increased to the downside yesterday and, as you know, Apple (AAPL) which has been long viewed as a surrogate for the current bull market disappointed the Street with last night’s earnings report. Earlier in the day, Tim (I don’t pay my taxes) Geithner put out a sound bite stating he’s optimistic the government won’t trip over the so-called “fiscal cliff” because, “I also think you’re seeing people show more realism about what is necessary” to avoid a fiscal crisis. The markets seemed to like this. Separately, the Wall Street Journal’s Jon Hilsenrath reported to have a source which says the Fed will act as soon as next week to stimulate the US economy. This was a surprise and was most likely the force that took stock indices well off there lows in late trading today”.
“We all know the truth. They only have one weapon. It’s called the printing press (or perhaps an electronic printing press that automatically moves newly created ‘money’ into the checking accounts of targeted banks or corporations). More and more printing could be ignored by the market which is far more powerful than any central government. To the best of my knowledge the European Central Bank does not have the equivalent of a Plunge Protection Team or an Exchange Stabilization Fund allowing them to manipulate European stock markets. And, even so, money printing has been secretly going on behind the scenes for months and yet the financial crisis in Europe and the debt burden of U.S. cities, states and the U.S. government itself continues to grow and grow. This is primarily due to the reduced level of revenue from a slowing economy and from businesses who are reluctant to expand in an uncertain political and tax environment. I fear we could be looking at another ‘Flash Crash’ type scenario. I hope I am wrong and the traditional ‘seasonal’ tendency for another rally try into the U.S. Presidential election is still an option. I hope this because I stuck my neck out with the ‘BULL’ call into the election – one that I made late last year! In truth, the rally could have ended on April 2 and we’re now headed into oblivion. For this reason, I have limited our exposure to the markets to a few selected trades in our Current Portfolio. As I told you yesterday, the overall picture doesn’t appear very rosy with Spain, Italy and possibly France next ready to go over a financial cliff and the potential to see both the U.S. Dollar Index and the Euro both trade at par (100) in coming months cannot be discounted in this kind of environment.”
In short, Mark is very cautious here, I imagine it’s because he’s thinking what Greg Weldon is thinking. That “Never has there been been a more critical fiscal or political situation. No one can really debate the fact that the fiscal future of the US hangs in the balance”
The one big factor we can be sure will move the markets powerfully is the Fed coming forth with QE3. Marks comments about the “Plunge Protection Team” and the “Exchange Stabilization Fund” underscore what Greg Weldon told Mike. “That when push comes to shove, and we stare into that deflationary abyss, every central banker in the world will choose to reflate no matter what the cost because they think that they can deal with reflation better. In their minds its preferable to the pain of deflation. That’s the bottom line.
It sure will be an interesting next week, if as Mark Leibovit say’s above “the Wall Street Journal’s Jon Hilsenrath reported to have a source which says the Fed will act as soon as next week to stimulate the US economy”.
Hang on to your hats! At the time of this writing its 12:38 am PST and the S&P September Futures are trading down 2.25 points or the equivalent of 1336 on the cash S&P 500.
Mark Leibovit’s Gold Letter, # 1 Gold Timer for 10 year period & #2 Gold Timer for 2011
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