Indicators Suggest Bears are Beginning to Control the Tape


Author Larry Berman

Posted: 10 Apr 2012 re-posted from etfcm

Small cap growth as measured by IWO continues to show signs that we have at least begun the next distribution process. It tells us little about how low a correction can take us. We do know that when small cap growth leads the corrective process, it likely resolves to the down side in due course. Of course, we are facing the beginning of earnings period that has the lowest expectations in a few years in terms of growth, so that either means that the high margins have reached a pinnacle or global growth is notably slowing.

The VIX closed above the falling 50-day average for the second time in the past month, which suggests that the bears are beginning to take control of the tape compared to the first few months of the year. A close below 1371 (2011 high) would be a confirmation that the high of the year has likely been seen. A close below the rising trendline 1369 and the 50-day average in the same area would suggest a larger correction towards 1290-1300 is likely.

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