Was I a week early?

Was I a week early?

 

Last week I had some posts on how the Nasdaq was leading the charge up in this bear market rally of almost five years duration – and was leading it lower.  I may have been a touch premature.  But what is a week in a bull market that has lasted 240 weeks?

But yesterday, the Nasdaq extended its amazing risk-off run to the 3428 level.

This was a precise hit on my long-term tramline!  But then, it turned tail and fell heavily.

How about that?  I drew my tramlines weeks ago when I had enough major touch points and projected the upper tramline as resistance and where rallies would likely top out.

And after this hit, the Nasdaq retreated like a Scalded Cat.  Here is a close-up

The red line is my long-term upper tramline and I can now draw short-term tramlines on this hourly chart.

What news item produced this reversal?  Nothing – it was a quiet news day!  You should know by now that I do not believe news drives markets.  That is putting the cart before the horse.

The fact is: the market hit my upper tramline (resistance) and was knocked back.  That much was predictable.  That’s what tramlines do – they pay no heed to the news.

Sentiment has been uber-bullish of late with very positive noises heard about the US, UK and Eurozone economies (and now China after the plenum).  Everything appears hunk-dory with the VIX  back near the incredibly complacent 12 handle.

Pundits are calling for a small correction at worst, leading to the much-anticipated Santa Rally – and then into clear blue skies next year as the Fed manages the tapering exercise with expert hands.

Ha!

Remember this, major bull markets turn when sentiment is at or near an extreme.  This week should go into the textbooks explaining such a connection.  It is an exhibition of herding at its most perfect.

 

 

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