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May 15 Market Wrap

Posted on May 15, 2009 by Adam

Stocks ended a down week on a low note, although the S&P managed to remain indecisive. Prices traded down to 878, but failed to test the all important 875 level.

Yesterday, the $BPSPX went on bear alert - which signals that more downside may be coming. After today, it is likely that the $BPNYA, the bigger picture indicator, will have slipped into bear alert as well. This is coming off of fairly overbought levels. Bullish percent levels haven’t been this high since 2007.

For that reason, I will avoid buying stocks until we produce a new bullish signal. However, I won’t pile on the shorts until we break 875. That should act as a good confirmatory indicator to our bear alert signal.

Just to give you some context, the last time the $BPNYA produced a similar signal, it went on bull alert. That was in March. From there, the S&P rallied nearly 40%. I believe this signal could have similar implications, so be alert.

See you next week.