Thursday, March 28, 2013

Is A Market Top Close At Hand?

I have been bullish on the market (since last September), however recent action is making me nervous.

Given the extreme momentum thrust in the YTD rally, I have felt any possibility of a market top would be longer-forming and protracted, again because the built-up prior momentum would have carry-through, enabling any dips to recover fairly quickly. However, note the chart below:


It’s an hourly chart of the S&P 500. Over the last ten trading days, the index has been unable to break through the all-time high level of 1565, getting to or near 1564 a few times only to abruptly retreat. Note also that during these ten days, the S&P 500 has traded within a wider range (1540-1564), i.e. volatility has been rising. This expanded high-low range is bearish to me as long as the index is unable to get through the 1565 level. It indicates distribution is occurring, which is typically not a bullish occurrence. The wide bid/ask spreads infer that buyers and sellers are indecisive and reacting to external events with great uncertainty.

What is forming is an ascending triangle, with higher lows and stalled (flat) highs. Again, we will see if this triangle breaks out to the upside through 1565 or to the downside through 1556. Needless to say, a break above 1565 will confirm that we remain in a bullish uptrend (risk-on). However, if this ascending triangle were to breakdown in a meaningful way, it could indicate that the tide has turned and prior built-up momentum has finally been worked off. I would then reassess my bullish stance on the market.


  1. Wow, thanks for posting the beautiful chart. Simply awesome. It's the chart of charts.

    The AP reported S&P 500 moves above its record high. The chart of the Standard & Poor's 500, $SPX, SPY, shows a new daily high at 1,569,up 0.75% for the week, beating a previous all-time high set in pre-financial crisis on a rising US Dollar, $USD, UUP, which closed at $83.14, up also 0.75% for the week, while the Major World Currencies, DBV, traded lower commencing competitive currency devaluation. Action Forex reports that the EUR/JPY closed at 120.46; its Yahoo Finance Chart, when combined with European Shares, VGK, and US Shares, VTI, shows that investors have been rotating out of the former and into the latter since February 1, 2013 on fears of EU default. Nasdaq Large Cap Socks, QQQ, have been a safe haven investment for flight from EU debt crisis contagion.

    A tectonic geopolitical and economic shift is at hand, as the global economic paradigm of Liberalism is at a pivot point and is about to enter Authoritarianism, as the world central banks monetary policies of debt monetization and ZIRP, have crossed the rubicon of sound monetary policy, resulting in the exhaustion of monetary expansion. The Apostle Paul writes that it is Jesus Christ who is at the helm of the Economy of God, Ephesians 1:10. He has been expanding credit globally through the Fed’s QE 1 through 4, the ECB’s OMT, and the BoJ Unlimited Easing; but the world is passing through Peak Credit on Eurozone sovereign and banking insolvency, as is seen in European Stocks, VGK, and the European Financial Institutions, EUFN, trading lower, which have turned World Banks, IXG, and the Asset Managers, BLK, WDR, EV, STT, WETF, AMG, seen in this Finviz Screener, and the Credit Service Companies, such as V, MA, DFS, AXP seen in this Finviz Screener, topping out in value.

    Inflationism is turning to destructionism as the dynamos of global growth and corporate profitability, that have underwritten crony capitalism and eurozone socialism wind down; and the dynamos of regional security, stability, and sustainability, wind up, establishing regionalism The world is passing from being a credit and carry trade banker centric world to a diktat and regional governance centric nannycrat world.

    The world stands at Peak Toxic Credit, as is seen in the chart of Fidelity Investments Mutual Fund FAGIX, topping out. This mutual fund contains the most distressed of investments, which were taken in under QE 1 and exchanged for “money good” US Treasuries, which were returned to the Fed and are now classified as Excess Reserves. The banks really do own the US Treasuries residing at the Fed, but will not, repeat not be selling them at any time. And indeed for a while as stocks, VT, trade lower, these will be increasing in value before they too fall dramatically lower in value. Shortly the banks will become integrated with the Fed, and be known as the government banks, or Govbanks, for short. The Too Big To Fail Banks, RWW, will be seen and will exist as Big Enough To Help Govern. The same will be true in the Eurozone, the European Financials, EUFN, will be unified into a One Euro Government, as leaders meet in summits to waive national sovereignty and pool sovereignty regionally, and announce regional framework agreements which establish EU regional governance.

    In summary, the S&P 500, $SPX, SPY stands at an Elliott Wave 5 High; the Business Cycle has been completed; and the world is entering Kondratieff Winter, which will see all existing political and economic life destroyed.