The week before the holidays seemed to be yet another bear tease - diet peanut butter if you will.
And the last couple of days have seemed like the resumption of the same old relentless bull run.
Not so.
Markets are well known to look for the maximum pain that could be inflicted on the maximum number of people. Thus the dumb money/smart money divide. The market's nature is to build bubbles in complacency and outlook (also called a meme) and then to burst them spectacularly.
This recent action is yet another piece of the topping process - conditioning investors to expect rallies. I'd say we're about there. Think about it - what would surprise you the most right here - it would be a plunge.
Last week's action had all the marks of a truly strong trend, one of which my colleague Elliot pointed out - good news was met with selling. I'm perplexed that this week has had a strong trend, on the bullish side. But I'm of the opinion this is the last bit of conditioning.
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7 comments:
The bulls do their best work on the smallest volume.
Note that the 3 prior multi-week crashes in the last 80 years had 4-6 month relief rallies where the % gain approximated the % loss. In our case, we lost 57.7% from the top and have now gained 56.7% back. So we should be close to the end, if we are not already there. The three crashes I am referring to are October 1929, March 2000 Nasdaq and the 9/11 S&P crash (that actually began a few weeks prior).
I forgot to add that within several months each of those rallies were completely undone and more.
Very interesting information Aditya!
Will definitely do some digging.
Do you have a blog? Or perhaps you leave comments on slopeofhope, etc? Would like to follow your thinking, thx.
Your blog is pretty much the only one I "bless" with my comments.
We nearly hit the exact % retracement today which is right at the GS 1050 level.
One thing in the Bears favor here is the McClellan Oscillator. After every high during this rally, the market would consolidate while the Oscillator would dive. Then when a meager 50 point correction would happen, the Oscillator would look completely oversold presenting a big buying "opportunity."
If we can hold the losses and expand on them today, this time will be different - we will have begun a decline off the high end of the rally - which should indeed mark the end and the beginning of my move to the 500s on the S&P 500.
The exact % retracement of the loss would take us to 1051.5 today - we have to see if that level holds here.
The high today was 1051.8 - so far its holding.
After the Nasdaq crashed in 2000 it also gained back its exact percent loss (down to 0.2%!) in a retracement rally before then losing 70% of its value.
Chad,
Lets rally the bears tonight (9/15) and get ready to roll! The bulls rein of terror is now over and it is now time to resume the run to 500 on the S&P 500.
Let's put a 9 handle on the S&P this week!
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