There Is a Slightly Increased Risk of Total Market Failure

I adopted a bullish bias early this year once I acknowledged that we could be embarking on a very long-term uptrend. That decision has served me well. That said, I remain open to a market top forming, though I rarely discuss it because of the relative absence of evidence for its arrival (i.e., we just keep on going up). However, the market is expensive and it won’t remain that way forever.

Now, what I’ve been expecting is a low to be put in place here from which we would rally well into next year. Now, that low may have been put in already (the bull count) or it may need another challenge of those lows (the bear count). Be that as it may, be cognizant of these two points:

1. If something big (like “primary 4”) was put in place already, we only need one condition to be met for a high of great significance to be complete: we need only a new high above the early September high and we have that.

In other words, I have been looking for either a two (or even a 4) of intermediate (orange) degree here, like this:

ES

but there is little stopping us from also counting it like this:

ES

2. I bring this up because the nature of this rally from the October low does not feel like the beginnings of a long uptrend. It bears some resemblance to a blowoff top. We’re seeing the move in $TSLA, now the short squeeze on Avis that has caused the entire Dow Jones Transportation Average to move like a penny stock. It’s alarming. Speaking of that average, it, too, may be counted as complete here:

DJT

Huge needle candles on broad indexes are very bad, imo. Also, the $RTY has consolidated forever probably completed a 4th primary wave itself (this summer). And all it requires to “finish” is some new high, which $IWM got today:

IWM

In other words, if it wants to be “done,” it’s welcome to be so here. The question ultimately boils down to whether these valuations can be accepted, and whether we have actually escaped the economic troubles or not. Those are debatable points that only genuinely smart money can actually answer while we all try to play along with them.

Now, I’m not trying to make anyone super bearish, but, the behavior of some of the things we’re seeing here are symptoms of tops, rather than bottoms or middles. However things turn out, we should know soon. While I continue to expect a pretty big drop to retest the October lows, if the severity of that drop is extremely dramatic, that will be our big clue. But, first, we still need to see that. So, I’m just thinking ahead here, just in case.

If we do get a big retracement, I just don’t want to alarm anyone if I take on an even more bearish tone while we’re down there. Even if we do get down there as I expect, it doesn’t guarantee us that the low I’m expecting now is what I will be expecting then.


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