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A Hollywood Ending for the Stock Market

By Jeff Clark
Thursday, October 28, 2010

Some things never change...
Last Sunday, my wife forced me to watch the movie "When Harry Met Sally" for the billionth time. I couldn't object. After all, she granted me unobstructed access to the television during the first game of the World Series last night.
The movie is about a man and a woman who don't like each other. After some time passes, they become friends. Eventually, they become romantically involved. He finds a way to disappoint her, and they hit a rough patch. She gets mad. He apologizes. They get back together. And everyone lives happily ever after.
It's the same, tired, old story that Hollywood goes back to again and again... But it makes my wife cry every single time.
"Sweetheart," I said, "You've seen this movie a billion times. You know how it turns out. Why are you crying?"
"It's just so sad," she replied. "What if she doesn't forgive him? It could be different this time."
It took the strength of Hercules to hold back what I wanted to say. But as any man who's approaching 18 years of marriage will tell you, a hug and a kiss on the forehead is a far better response.
But I'm not married to you. So I have no hesitation in telling you what I wanted to tell my wife last Sunday...
It's not different this time!
Just as the conclusion of "When Harry Met Sally" doesn't change, the pattern tracing out in the stock market right now is the same, tired, old story we've seen before.
The stock market is ready to break down. It's showing the same heart-wrenching, tear-jerking story it played out last April. And the ending doesn't change. Take a look...
The S&P 500 broke down from the rising-wedge pattern last week.
It rallied back and tested the breakdown level. Yesterday, it fell back lower – consistent with the action we saw six months ago.
There's room for a small bounce back up to 1,188 or so on the S&P 500 – just to mimic what we saw in April. But the intermediate trend now is lower.
There's a big correction coming.
Of course, the past is never a guarantee of future results. But we've seen this movie before. We know how it ends.
It's far better to take action now: Lighten up on long positions and maybe make a short trade or two. Otherwise, you may end up crying like my wife, even though you knew what the outcome would be.
Best regards and good trading,
Jeff Clark

Further Reading:

Jeff has been warning of another "flash crash" for some time, and now he's got an alarming chart you need to see. "The economy stinks. The mortgage market is riddled with fraud. Banks aren't lending money to anyone. And taxes are going up," Jeff wrote. "Yet, the stock market is partying like there isn't a care in the world." Read more here: The Odds of a Crash Are Higher Than You Think.
Just because Jeff suspects another crash could be coming doesn't mean you can't still make money. Get the one idea he's bullish on here: If You Must Be Bullish on Something, Try This.

In The Daily Crux
Market Notes
Euro rally fails as currency falls back to last week's lows.
An unbelievable 10 out of 14 U.S.-listed Argentina-based stocks hit 52-week highs on Wednesday.
Cable providers Comcast and Liberty Global touch fresh highs.
Earnings today... ExxonMobil (biggest company in the world), AstraZeneca (drug-maker), Potash (fertilizer giant), Barrick Gold (biggest gold miner).
Market Watch
Symbol Price
S&P 500 1183.78 +0.1% +13.5%
Oil 35.39 -0.1% -10.3%
Gold 131.24 +1.3% +30.3%
Silver 23.43 +1.6% +47.7%
US-Dollar 77.99 +0.4% +2.0%
Euro 1.39 +1.2% -5.3%
Volatility 20.88 +0.8% -25.2%
Gold Stocks 514.36 +3.0% +33.9%
10-Year Yield 2.66 -1.9% -22.0%

World ETFs
Symbol Price
USA 118.40 +0.0% +13.4%
Canada 28.60 +0.5% +19.8%
Russia 19.99 +0.3% +13.3%
India 38.11 -0.1% +33.9%
Israel 16.55 +0.1% +22.1%
Japan 10.06 +0.3% +5.7%
Singapore 13.53 +0.2% +28.6%
Taiwan 13.90 +1.5% +17.1%
S. Korea 55.04 +1.0% +26.7%
S. Africa 67.47 +1.1% +31.6%
China 45.11 +0.1% +6.9%
Lat.America 51.83 +0.8% +22.3%

Sector ETFs
Symbol Price
Oil Service 118.90 -1.6% +0.5%
Big Pharma 65.81 +0.4% +6.7%
Internet 69.88 +0.3% +28.6%
Semis 14.32 -0.1% +28.4%
Utilities 31.67 +0.3% +10.4%
Defense 17.99 +0.5% +15.8%
Nanotech 9.32 -0.9% -2.4%
Alt. Energy 10.10 -0.9% +4.6%
Water 17.30 -0.4% +10.1%
Insurance 15.74 -0.8% +17.5%
Biotech 20.01 -0.3% +31.4%
Retail 17.85 +0.2% +21.6%
Software 23.67 +0.5% +25.4%
Big Tech 52.30 +0.2% +26.4%
Construction 12.02 +0.0% +6.8%
Media 12.99 +0.4% +25.4%
Consumer Svcs 64.18 +0.4% +25.6%
Financials 53.04 -0.3% +5.8%
Health Care 64.57 +0.4% +12.0%
Industrials 59.51 -0.3% +22.7%
Basic Mat 68.17 0.0% +28.8%
Real Estate 54.92 -0.6% +38.6%
Transportation 85.44 -0.1% +30.9%
Telecom 21.99 +0.6% +24.7%