How Mr. Market could put the hook, big time
The chart above shows how bull market highs are achieved when almost everyone is expecting one. It does now – for so many good reasons that I won’t bore you with a checklist. Take my word for it: the bull is dying. Most of the reasons given by experts would have us believe that the stock market is somehow tied to reality. I won’t insult your intelligence with such a claptrap, since you’ve had enough on CNBC. I’ll just mention my own reason for thinking the Big One has begun: the all-time high of QQQ, a speculative vehicle that tracks preferred stock by chimps and fools who pretend to manage your money, has hit an all-time high. the highest time at 382.75 on September 9 which came close to three cents of a target I had rolled back in January. Stocks have fallen sharply since then, giving my magic number a fighting chance.
But maybe not, or at least not yet. Because if Mr. Market wants to get the hook as firmly as possible before taking any prisoners, it wouldn’t hurt him to push the broad averages, or at least the whimsical QQQ segment of the market, above the top of the 9th. September. it started to look so promising for the permabears. After such an unpleasant fall as the one that occurred last week, new highs could create a knockout very similar to the one that occurred at IBM. The peak that I referred to as “False top” occurred in mid-2009, and it came within inches of a major Hidden Pivot target that I had released to subscribers months earlier. . Imagine the elation I felt when IBM took a sharp dive for eight weeks after getting close to my magic number. Unfortunately, I was so busy patting my back that I didn’t notice the increasing vigor of the rebound that followed. Just a bear, I thought. But I was wrong. The stock continued to climb until it no longer looks like a corrective rally in a bear market, but rather an assault on the old high.
The ugly truth dawns
When IBM broke that level, it did two things psychologically: 1) it made the bulls more confident than ever; and, 2) he gutted and disembowelled the very last of the bears, which threw in the towel with a short frenzied blanket. By this point, purchasing power was depleted, as the bulls were all-in and the bears were financially and mentally depleted. You can see what happened next: IBM started to fall, sucking in investors who, at least for a while, must have thought they were ‘buying the decline’. It took a few months for the ugly truth to register that they were buying in a bear market. The very steep two-week avalanche that followed at the end of September reflects this revelation. Study the chart intently and let your imagination tell its own story of what investors thought as the bloody carnage unfolded. Could it happen again? Be the judge.