By Gareth Soloway on May 4th, 2010 12:02pm Eastern Time
The writing was on the wall and most of my previous articles over the last week told the Street this was the case. In recent days, I talked about the metal stocks like AK Steel Holding Corporation (NYSE:AKS), Southern Copper Corporation (NYSE:SCCO) and United States Steel Corporation (NYSE:X) being a leading indicator for this market. These metal stocks dropped sharply in recent weeks. When the metal stocks rally, it shows economic activity, in fact, it is one of the best signals of economic activity. The fact that these stocks have been crushed in recent weeks was a tell tale sign the market was near a dramatic fall.
In addition, I noted this same signal on the agriculture stocks like Monsanto Company (NYSE:MON), The Mosaic Company (NYSE:MOS) and Potash Corp. (NYSE:POT). These again are major leading indicators of economic activity. The key about the metal and agriculture stocks is not that there is no economic activity out there, it is more the organic growth that is missing. The economy has recovered somewhat based purely on massive government stimulus spending. Again, the problem with that is that it is not sustainable and the metal and agriculture stocks have been telling us this.
The best signal of all came last Tuesday. Last Tuesday the InTheMoneyStocks confirmation signal was triggered to the downside. Ever since then, the market was shortable on every bounce. It has worked like a charm. Understanding the technical signals is number one in this market along with reading the the metal and agriculture stocks.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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