Tuesday Afternoon Nov 27 2012
U.S. equity stock funds had a net outflow of just over $9 billion in the week ended Nov. 21, the biggest outflow for a single week this year, according to research firm EPFR Global. It is hard to see how we can have a stock market collapse with so many in the Safe Harbor of bond funds.
This is classic Wave Two behavior. We rate the move up last week as some sort of Wave One. Wave Twos pullback with investors believeing that there is nothing to the move up. Wave Three proves them wrong. This is exactly what we should expect. With most investors out of stocks there is plenty of money to fuel a rally from those leaving at precisely the wrong tine.
The two hour chart for the SPX is staring to roll over to the downside with the sell off today. We still expect a significant low by the end of the week. Our suspicions that we should not have bought lst week are now confifrmed.
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