Louise Yamada: Stock Market Technicals Haven’t Confirmed This Bull Move

By on August 15, 2012

Yahoo! Finance Breakout’s Jeff Macke turned to long-time market technician Louise Yamada to get her perspective on the current market climate.

Yamada commented the bull market has been going on for quite awhile. The average bull market advances 34 months and we’re on month 41 so it’s “long in the tooth,” Yamada said. She added this is the “whatever it takes rally,” and as long as the Fed is standing by with the ECB to do whatever it takes, people will perceive it as going higher.

Yamada said the rally has been selective and there are technical underpinnings that are not confirming.

When asked whether it was time to buy or sell, Yamada said it depends on the stock as the market has become very selective. Back in April she said there were a number of Dow stocks which had 10 year bases and have moved ahead such as AT&T, Verizon, Disney, Home Depot, Coca Cola and Walmart. Yamada indicated these stocks may pull back because we’re at the top of the channel. However, she warned it would be a dangerous gamble to short an uptrend.

Yamada says it’s possible the market will go to the 2012 highs, but some technical indicators haven’t confirmed the July peak. They include the new highs/new lows, volume which peaked at a lower high than this last advance (which could be a summer factor), the 10 day moving average, and the percentage of NYSE stocks under their 200 day moving average (when you have a sustainable move this should be at 70-80%, but is having trouble getting over 50%). However, the VIX is fine as long as it stays under 20, according to Yamada. The economic picture is mixed with some economists calling for recession, while some see growth. She added the transports are moving lower so those following Dow Theory say a sell signal is in place.

The interview continued with Yamada discussing the influence inflation and deflation have on stock and bond returns and why it indicates investors should stick to stocks showing growth.

A year ago, Yamada was predicting a very long bull market for gold [link].

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