Before the bulls’ heads explode from the massive one day 11.54
point rally in the S&P let me come to the rescue and pour some ice cold
water on the euphoria. I’m going to keep
the prose to a minimum and just offer a series of charts. The first three are the last three major
double tops IN WHICH the right peak just fell short of the left (this is hugely
important psychologically). The last is
just a little bear porn that might just morph from fantasy to reality.
July – August 2011
1) July high of 1356 reached after a run up
from a major June selloff. 2) Quick V
bottom hammered out into June’s support. 3) Second peak high of 1347, just 9 points short of the prior high. Three weeks later, or 13 days, the market
made a low of 1101. Bottom line, the easiest trade in the world was to bet that
the second peak would reach at least 1356.
Oops, guess that didn’t work out.
Nothing like getting smacked by 250 points to try and capture 9.
April – May 2012
1) April high of 1422 reached after a run up
from a minor early March scare. 2) Quick
retracement down to March support. 3) Second peak high of 1415, just 7 points short of the prior high. Three weeks later, or 13 days, the market
made a low of 1291. Bottom line, the easiest trade in the world was to bet that
the second peak would reach at least 1422.
Nothing like getting smacked by 124 points to try and capture 7. Starting to see a pattern here?
September – October 2012
1) September high of 1474 reached after a) massive ECB and FED stimulus and
b) a mild August selloff. 2) Quick V bottom
hammered out into August’s pre-QE3 support. 3) Second peak high of 1470, just four points short of the prior high. Bottom line, we are six days into a pattern that has led to
massive selloffs the last two times.
Furthermore, it’s October. You
know, the home of the Crash of 1929, Black Monday, and All Hell Is Breaking
And now, just for fun…..2007
versus 2012 double tops.
1) Both showing massive run ups
with no major correction. 2) Both experiencing
sharp V shaped bottoms hammered out in major support levels. 3) Both making slightly higher highs eliciting “to
the moon” euphoria. Oh, and no big deal, each higher high also came on the back of massive credit bubbles. The chart speaks for itself.
Happy October Bulls!