The rally finally ran into some resistance.  Still, the Dow Jones Industrial Average remains above 11,000.  However, the thing that caught my eye last week was that the Dow
broke below its recent trend-line.  By itself, not a cause for major concern, just a key to notice.  The question is whether it can get back above that level, or will this be the start of a more meaningful correction?

It is also worth noting that the MACD indicator is showing more downside momentum than it did at the same price level earlier in April.

A Peek Over the Wall.

Is
China's Shanghai Index sending a warning about the world economy or just
their economy?

Unless things change in a hurry, China's Shanghai
Composite could drop significantly.  This chart shows the triangle
pattern that played-out over the past nine months.

You can think of the Triangle as a well-contested battle
between the bulls and the bears.  Inside the pattern, neither side
gives-up much ground.  However, when one side loses conviction, the
market  surges in the direction the winners push it. 

Triangles
are often continuation patterns.  So, be wary that this move is a
head-fake down to trigger a big rally.  Otherwise, the target is pretty
far below.

Sentiment Here in the United States is Still Very Bullish.

While stocks have certainly become more volatile in the last two weeks, newsletter writers seem to be taking it in stride.  According to Bespoke, the latest Investors Intelligence survey of newsletter writers  found that 54% of those surveyed are now bullish on the market.  The last time bullish sentiment was this high was back in December 2007, before the crash.

Another important to measure of the crowd’s extreme bullish sentiment is that fewer than 20% of advisors are currently bearish. According to Prieur du Plessis, these are first indications of a market top.

Another Sign of a Potential Top?

The U.S. Treasury Department plans to sell “up to” 1.5 billion
shares of Citigroup in the government’s
biggest step yet to exit the 27 percent ownership of the bank it rescued
during the financial crisis. Bloomberg quotes Geithner as saying: "We’re
putting TARP
out of its misery," and "the government is withdrawing from the
financial industry after forcing lenders to recapitalize with private
money."

If you think that is funny, then so is this cartoon.

The rally finally ran into some resistance.  Still, the Dow Jones Industrial Average remains above 11,000.  However, the thing that caught my eye last week was that the Dow
broke below its recent trend-line.  By itself, not a cause for major concern, just a key to notice.  The question is whether it can get back above that level, or will this be the start of a more meaningful correction?

It is also worth noting that the MACD indicator is showing more downside momentum than it did at the same price level earlier in April.

A Peek Over the Wall.

Is
China's Shanghai Index sending a warning about the world economy or just
their economy?

Unless things change in a hurry, China's Shanghai
Composite could drop significantly.  This chart shows the triangle
pattern that played-out over the past nine months.

You can think of the Triangle as a well-contested battle
between the bulls and the bears.  Inside the pattern, neither side
gives-up much ground.  However, when one side loses conviction, the
market  surges in the direction the winners push it. 

Triangles
are often continuation patterns.  So, be wary that this move is a
head-fake down to trigger a big rally.  Otherwise, the target is pretty
far below.

Sentiment Here in the United States is Still Very Bullish.

While stocks have certainly become more volatile in the last two weeks, newsletter writers seem to be taking it in stride.  According to Bespoke, the latest Investors Intelligence survey of newsletter writers  found that 54% of those surveyed are now bullish on the market.  The last time bullish sentiment was this high was back in December 2007, before the crash.

Another important to measure of the crowd’s extreme bullish sentiment is that fewer than 20% of advisors are currently bearish. According to Prieur du Plessis, these are first indications of a market top.

Another Sign of a Potential Top?

The U.S. Treasury Department plans to sell “up to” 1.5 billion
shares of Citigroup in the government’s
biggest step yet to exit the 27 percent ownership of the bank it rescued
during the financial crisis. Bloomberg quotes Geithner as saying: "We’re
putting TARP
out of its misery," and "the government is withdrawing from the
financial industry after forcing lenders to recapitalize with private
money."

If you think that is funny, then so is this cartoon.

When the SEC announced civil fraud charges against Goldman Sachs, its shareholders proceeded to lose $12 billion.

Here is what their stock is doing now.

If you are interested, the lawsuit stems from Goldman’s 2007 Abacus
deal.  Here
is the presentation document they used to sell that deal. 

Here are some of the news items about this that caught my eye:

• Why The SEC’s Theory Against Goldman Will Fail. (Forbes)
• Goldman
  Sachs & the SEC – Greedy Until Proven Guilty. (Economist)
• Goldman
  Sachs and America’s Regulation & Supervision Paradox. (Globalist)
• Financial
  Reform? Obama to Wall St.: ‘Join Us, Instead of Fighting Us’. (NYTimes)

The Lighter Side of the Issue.

 Did you hear that
Goldman Sachs made the Iceland volcano erupt? It did pretty well
shorting airlines. 

The Goldman Sachs lawsuit and financial reform are becoming common topics of every-day humor.

It’s one thing when the business press writes about a topic, it’s another when it is the subject of a David Letterman Top-10 List, an on-going discussion on Jon Stewart, and the opening segment of Saturday Night Live.  What do you think it means that this issue is now in the mass media?

When the SEC announced civil fraud charges against Goldman Sachs, its shareholders proceeded to lose $12 billion.

Here is what their stock is doing now.

If you are interested, the lawsuit stems from Goldman’s 2007 Abacus
deal.  Here
is the presentation document they used to sell that deal. 

Here are some of the news items about this that caught my eye:

• Why The SEC’s Theory Against Goldman Will Fail. (Forbes)
• Goldman
  Sachs & the SEC – Greedy Until Proven Guilty. (Economist)
• Goldman
  Sachs and America’s Regulation & Supervision Paradox. (Globalist)
• Financial
  Reform? Obama to Wall St.: ‘Join Us, Instead of Fighting Us’. (NYTimes)

The Lighter Side of the Issue.

 Did you hear that
Goldman Sachs made the Iceland volcano erupt? It did pretty well
shorting airlines. 

The Goldman Sachs lawsuit and financial reform are becoming common topics of every-day humor.

It’s one thing when the business press writes about a topic, it’s another when it is the subject of a David Letterman Top-10 List, an on-going discussion on Jon Stewart, and the opening segment of Saturday Night Live.  What do you think it means that this issue is now in the mass media?