Reality Will Rule

The SPX advanced +17.2% to the 4/2/13 1574 high from the 11/16/13 1343 low, having taken out the 1365.15 previous bull cycle high close, but not the 1576.09 10/11/07 bull cycle high.

The monthly SPX 5 RSI of 87.40 on 4/2/11 was and is extremely extended,  and the risk reward in that zone is obviously not positive as you can see on the chart for the past two bull cycles in this secular bear market that started with the  2000 top.

Each previous decline since the 3/6/09 667 low has been preceded by an extended monthly 5 RSI number, and the next one will be no exception despite all the spin from the media and buy side pundits, and of course the biased political machine.

The magnet is 1576.09, and that will get taken out before an all time 7 point RST monthly sell pattern can be completed, and that will be when the music stops preceding the next significant bear cycle. There is significant Pi time symmetry in June and August, so whether the market is O/B or O/S at the time it will be the confirming indication for directional bias.

The SPX is +136% to the 4/2/13 1574 high from the 3/6/09 667 -57.7% bear market low, versus the previous +105% bull cycle from the 10/10/02 769 cycle low. It is extended in time relative to past bull cycles at 1495 CD`s as of 4/9/13. The Fed`s market manipulation is artificial, but reality and the business cycle isn’t, so one can say that it isn’t “different this time”.

The market has many obvious negative momentum and sentiment divergences as the Fed continues to manipulate the market higher, and it continues to be led by the Defensive Issues which is obviously unusual for a normal bull cycle. I imagine it means “park the money” and keep one foot out the door so the next inevitable bear cycle doesn’t hurt as much.

The euro zone is a mess as socialism continues to explode, as well as the EU, and that will accelerate the continued economic weakness in the U.S. explained away by the phony Sequester excuse/drama. There has been a string of weak economic numbers recently, and the NFP data last Friday was a bad joke after all of the recent media/pundit/Gov’t positive spin. The speaking heads have been in full spin mode since the report explaining it away, and the Fed leads the spin charge.

However, we shouldn’t be surprised at that because “they” only tell you what they want you to believe, and lie about everything else depending on which team they are on in Washington. Cutting through all of the B.S., the success of any real economic recovery ultimately depends on actual true job employment and disposable earned income/wages. We are obviously a long way from that, and won’t get there in the current political climate, regardless of how much Bernanke expands the Fed balance sheet.

SPX Monthly Chart

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