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Friday, May 10, 2013

The Crowd Is Never Right

Chart Observations:

  • The crowd, the majority driving a trend, also known as bag holders, is never right.  This consistency provides the fuel that drives the trend in the opposite direction when ignited by FEAR.  This observations should be the foundation of every investment discipline.
  • Falling jobless claims which the headline suggests hints at a strengthening labor market draws us one step closer to an economic peak and stock market top.
  • A warning signal is generated when AWICC2 falls below -1.96 sigma.
  • A sell signal is generated when the power down trend (PDT) is broken to the upside. 

Chart: S&P 500 (SP500AVG), Average Weekly Initial Jobless Claims (AWIC) and AWIC Cycle Z Scores (AWICC1&2)

Headline: Jobless claims data hints at strengthening labor market

WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits dropped to its lowest level in nearly 5-1/2 years last week, signaling labor market resilience in the face of fiscal austerity. Initial claims for state unemployment benefits fell 4,000 to a seasonally adjusted 323,000, the lowest level since January 2008, the Labor Department said on Thursday.



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