Wake up that Dead Cat for Today’s Equity Bounce

by John Galt
May 15, 2012 05:30 ET

 

After several days of just horrid technical destruction and weak trading action, look for equities to start their Facebook dead cat bounce phase. Today, if it plays out as most bear market moves do, should see a rise in prices in the morning, fade after lunch, and then it is a coin toss if the markets finish flat or lower. If there is major selling into the morning rally then that is a very ominous sign. U.S. stock market futures, as indicated by the S&P 500 chart below, already have tailed off on the news from Europe and Asia overnight.

 

(chart from FinViz.com)

 

The biggest move to watch will be in the precious metals to see if gold can recover the $1600 level before the week is over and silver above $29.50. I think that gold has a shot at it when the Facebook frenzy begins on Friday but looking at the F.D.I. report from China overnight and the increasing problems in the Spanish banking sector any rally should be sold into as it will be short lived.

 

The sooner this bear phase bounces down to the 1260’ish target area on the S&P 500 and either breaks decisively or holds, then and only then will the Fed hint if there is any panic move forthcoming. At this point in time, it looks like the most they will do is attempt to jawbone the markets meaning small investors who gamble are about to get Bernanked again.

 

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