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The Big Short? That was nothing, this is the Short of a lifetime!

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As usual there are 2 possible scenarios I see post the Fed "no action on interest rates" move (or lack of move) but my bias is for the rally to continue for a while, at least until NFP in 2 weeks time.  Someone said there is no reason for stocks to go up but equally there is no reason for them to go down, except of course for Fear and Greed...  Hmm...

 

I do not buy into the whole Fundamentals as a driver philosophy, at least not in micro terms (macro yes but central bank policy has blown all that away).  Absent any other factors greed will win out after no rate rise in my view but not for much longer as Q3 earnings start to come out, which I believe will be the straw that breaks the Bulls back, unless the collective madness continues indefinitely as central banks just keep pumping more and more in until we have hyper inflation.

 

Anyway, absent fantastical scenarios I see 2 possible technical set ups on US large caps as follows:

 

  1. The Head & Shoulders top holds as the top of the market with a rebound off the Triangle line from the Head and Right Shoulder tops in an EWT1-2 form (red labels in the attach charts) followed by a second break of the neckline
  2. The recent move down was a EWT3-4 retrace and we are now in a 1-5 up to the top of this move, and quite possible the top of the market in Oct as Q3 earnings disappoint and the hockey stick forecast breaks (as they always do!).

I favour scenario 2 and expect to see a short continuation of Fridays retrace in Europe before the US opens and propels everything back up.  Why?  The set up on the Dax, FTSE and Nikkei shows more to go in their retrace patterns and both Nasdaq and Russell 2000 are much more buoyant than a market top completion might suggest.  Also COT data turned sharply positive for the S&P500 and Nasdaq last week, suggesting there are more positive to come.

 

Here are the charts:

 



 

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Once again, your insightful comments are simply impeccable mate. I share a similar opinion to you regarding Europe and South Africa. South Africa in particular are heavily weighted on resaws stocks so, The falling commodity prices including oil will impact heavily on Monday unless, Asia comes out with something spectacular.

 

 

So, if you are an intraday trader, you would go short Monday morning then follow US futures before closing out?

 

Interested to here yiur comments?

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Little bit late to this discussion but something I noticed the other week which I thought was interesting.

 

Quarterly FTSE shows divergence price/RSI:



 

Monthly FTSE shows divergence price/RSI:

 



 

Weekly FTSE shows divergence price/RSI:

 



 

This just got me to wondering about the potential for a market correction which clearly was the subject of the thread. Thought I would share this for anyone interested, I am not one to take to the streets with a sandwich board saying the end is nigh but it looks a bit suspect.

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