Market Thoughts June 25, 2009

I think the market is in for a big correction during the summer. The failure of major resistance zones across the key indices is a telling sign that the bear market rally that started on March 10 might be coming to an end.

Tech, energy and commodities have been driving this rally and they are getting exhausted. Crude oil at $75 / barrel is clearly overpriced as we are only mid-way into the recession. Back to $60 within the next few weeks is both supported by seasonal data and the demand.

The four horsemen (AAPL, GOOG, RIMM and AMZN) have all been failing major resistance zones ($145, $450, $85 and $90). All the weekly charts looks weak.

The market tends to overreact in both directions to flush out the last bull / bears and then change direction. Selling the morning gaps seem to work for now until we correct. A 7% pullback in the S&P 500 doesn’t seem enough in this market. I’d like to see at least 875 or even 800 before the next run - if there will ever be one.

The “green shoots” might just be another hopeful mirage, a grasp for claws as there is nothing else left to do…