schreef:
The rally from late August is not quite parabolic, but it is pretty close. Parabolic rises typically do not end well. The NASDAQ 100 has been up for 9 straight trading days, and 12 of the past 13 trading days. Monday was a 90 percent panic buying up day in the Blue Chip indices, the 15th since the April 26th highs. Prices have now moved decisively above the upper boundary of the declining trend-channel from April 26th, and have moved decisively above the neckline of the reverse Head & Shoulders bottom from May 2010, shown on page 11. Precious metals are exploding higher. Quantitative easing by the Federal Reserve Bank is finding its way into most markets, driving prices higher, with the U.S. Dollar paying the price. Monday's decline was helped in part by short-covering, where those most pessimistic about the market are compelled to buy, and help the rally. The breakouts above the Reverse H&S neckline and the upper boundary of the declining trend-channel from April 26th push the odds a bit higher that a new Bull Market Rally started from the July 1st, 2010 lows. We continue to believe that the body of technical evidence favors this rally being corrective and not the start of a major new Bull Market run, however the odds of a Bullish intermediate term resolution, the Flat pattern we showed over the weekend in the big picture charts, may have risen from 30 percent to 35 or 40 percent with these positive breakouts.
There are several developing Bearish indications that argue a top that is significant is coming, perhaps soon. New tonight is that over the past week, Bearish divergences between rising prices and declining ten day average Advance/Decline Line indicators formed. We show charts of those developments in the S&P 500, NDX and Russell 2000 on pages 4 and 5 tonight. We are also seeing very overbought levels in the Daily Full Stochastics and overbought levels in the Weekly Full Stochastics and Daily Relative Strength Indicators tonight in major U.S. stock indices. We could label Monday's rally as the fifth and final wave up for small Rising Bearish Wedges that mean 2-up has topped. However, if the pattern morphs into a parabolic rise, we could see a sharp rally continue from here until a point of exhaustion which would likely end with a plunge decline, as most parabolic rallies do.
We are watching for new sell signals across the board in our key trend-finder indicators. That would be confirmation that wave 2-up has topped and 3-down has started. Not there tonight.