Normal Bear Market....

While the French elected a new "normal" President, and were taking all their "ponts" (for the non Grenouille among you, May is a month with loads of bank holidays), Markets refused to have a break and continued its course...C'est normal, it is a bear market....

Last month, I was expecting Europe indices to pause as they were oversold and on support, and US and Asia were to catch up...Well, both collapsed. Now the latters are  testing support and oversold, and Europe has broken support...Commodities index as well, and the US$ broke up... I dare to say again... we are to have a pause...


MSCI Asia Pacific ex Japan weekly chart: Collapsed and on support

The index fell directly to the Fibo retracement which happens to be also the lower band of the Bollinger Band, which corresponds to 2 standard deviation. 
Momentum is still down


Next strong support is 10% down, ie last year low...






S&P 500 weekly chart: Same as Asia, collapsed as well

S&P 500, as expected, collapsed and is at the level mentioned last month..1270's... It is oversold, with downward momentun, on support.
A pause is expected..Keep the short.. Sell on rebound.
The next big support is previous year low, around 200 points lower...The target for the next few months... For the short term the support is 50 points lower





CAC Index weekly chart: Broke support..Oversold
 
CAC, like the Eurostoxx 50 analysed last month, was testing the last strong support...Broke it easily...nothing before last year low.... 10% lower...














CRB (Commodities) Index : Three times were enough...


Last month, we noted that the CRB index was testing for the 3rd time the strong support... well broke and acceleration of the move...














Conclusion: Keep the short, sell more...
The question now is...where is the bottom?  or when to buy?
I use three criteria (in that order):
1) Technical Analysis!! c'est normal...(a new trendy word sorry)
2) Sentiment.. not mine...I mean in general
3) Fundamental analysis... Yes! though the least important for me...But it gives some useful insight for the long term view



OK so Bottom is when 1) market is oversold, at a support level (like 2009 low which is alos 2003 low), 2) sentiment is extremenly negative and it could be measured with the volatility index: the higher the more panic, and you can see from the chart below that we are not there yet.. Also when the press talks about the end of the World... more on sentiment in the next blogs and finally 3) when valuations are very low.. we had all three in Feb 2009... 


VIX index monthly: No panic yet.... far from previous peak...

Happy investing!