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Why the latest rally could be a bull trap

This week has been a strange market week for sure. I have held back on picks mainly because I want to see some clarity as I believe we are at a market top, and economic data has peaked out. Furthermore, with sequestration ahead, debt ceiling politics, and the EU zone still in kayos, I expect the market  one year from now to lose half its value across all the indices. QE really is only geared towards the elite rich as a way to turn money over in the markets via high frequency trading; it does not help the real economy. Banks are at a 5 year low in loaning money, and the 4th quarter saw slight negative growth, which is really unusual. The 4th quarter is normally a time of more hiring, more production, more spending and growth when the prior quarters are positive. Furthermore, manufacturing was down in late November.

Durable good orders being up can be contributed to those with more money looking for write offs because of the higher tax rates they will have to pay.

Also, the pay roll tax holiday is no more, so the average consumer has less money to spend on things. This will equate to companies missing Q1 earnings rather badly in my strong opinion.

QE is also serving to keep gas prices elevated. While in the past, because the average person had a little extra money on hand, they could tolerate the higher gas prices. Now, it will be much harder for them.

Additionally, the rally this week so far has seen poor volume, which indicates to us it's more about short covering then strong accumulative money flows. The chart below from today shows this example:

The above shows a strong divergence in the accumulation line with a H/S on the MACD. With the weak volume, this indicates a market running out of steam. The money inflow looks weak to us. Example chart 2:

I actually do not agree with the move back up to 1550 once we retrace to 1500. I believe the wave pattern will continue to make lower highs.

My team and I believe the rally is a bull trap and we believe the best course of action at this time is to take a "wait and see approach"  We are studying trades for the rest of this week, and possible targets to write about next week.

Also, we will have our subscription site ready to go soon. Many have asked about the pricing, and here is what we have decided to go with:

level 1 will be $29.95 a month, which includes access to entire site, DD, analysis, Biotech and general market condition reports, trade calls, Macro headline analysis, option trade calls, exclusive videos for members, private twitter feed. These will occur on this site long before any of us tweet on our twitters. However, the private twitter feed will have our trade calls 5 minutes or so after we announce them live on the private show (refer to below)

Level 2 will be $49.95 a month  and includes all of the above plus:

Live level 2, instant trade calls and analysis with my team and I and, live support,  and market hours live access via a pass worded private live feed on my site. Questions answered, trade support with our opinions plus one on one support if needed via an additional private room on site.

Most Biotechs/any sector stocks we cover in depth on the site will normally have Seeking Alpha and other sites articles associated with them afterwards. However, We cannot guarantee this will always be the case as Seeking Alpha and other sites are independent of our site, and may not agree to publish said articles. Refer to how M.E Garza does it. Also, please refer to disclaimer which can be found on the homepage, upper left hand corner which explains in detail what I/we do and do not do and/or offer.

Additionally, we will be upgrading the site with an entirely different design. When the subscription service is live, I will blog about it.

I wish everyone good trading success now and in the future, hope to see you all on the new site soon!

Scott Matusow

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