Nobody rings a bell at the top of the market.
Well I want to tgo ‘ding a ling a ling.’
The Nasdaq leads the market and when the bull market ends it will be the Nasdaq that cracks first and will crack the most.
Its been an epic run so far:
But we have hit a ceiling. Is it a pause or is it the end.
The classic way to look at this from a technical standpoint is to judge the new sideways range is an equilibrium point and new news will push the price out of this range either up or down but in any event a long way. The traders simply let the equilibrium level break and jump on the move for a big piece of upside or correction.
Here is an example of the two triggers.
A lot of people will talk support or resistance, but that is not the model. This model considers the channel as a range for the noise within the equilibrium. No one is supporting or resisting the market is just jigging about around a consensus price. If it broke down you could be looking at a 25-35% fall on the upside there is a 30-100% upside. Getting it right is clearly a big call and one on which to make or lose a lot of money.
We are ultimately back to the inflation or deflation debate and an offset from that. Is the Federal Reserve going to keep pumping? If the do there will be high inflation and equities could go on a final vertical. If the stop pumping for fear of inflation or even because they cant or won’t avoid deflation, which I think is highly unlikely, then down will come the markets in a giant dump.
It must be said if you wanted to solve inflation all you need do is stop pumping, crash the stock market and all that money supply goes ‘foop’ off to money heaven as inflated asset value collapse.
So this is the rock and hard place we are caught between.
The market is acting like the inflation, deflation debate is not settled. In effect the Nasdaq is showing that debate swinging. If the market, or perhaps when, the market ‘knows’ inflation is going to be strong, Gold will go to $3000. It is isn’t. Instead it is flapping around going no where much.
Deflationist must argue that you cant heal a deeply injured economy with and that that money will seep away and e destroyed leaving a deflationary hole. I cant see that at all but the market is telling me that can be ‘a thing.’ Its also not actually putting its money where its mouth is on the inflationary idea which again is disconcerting.
Like so many I see inflation around me big time. The only thing I can think of is that markets are so distorted by liquidity programs that it has lost a lot of its efficiency and therefore prices are simply wrong. That is not good either.
So the thing to do is simply, don’t trade what you think, trade what you see.
If the channel breaks up, then hurrah. If it breaks down then flee.
On balance I have turned bearish.
Now the world is opening up, reality is likely to bite. Yet if the chart breaks on up then I will go very risk on, because if we do get yet more inflation asset prices are going to get hugely rebased.
I cant actually see how the US or Europe can stop printing….. but when the market stops performing the way you expect, it is time to reassess your axioms.