An Ongoing Balloon Ride

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Weather balloons may reach stratospheric altitudes of 40 km; well-over double the standard altitude of most commercial jets.  Diminishing pressures at these altitudes cause the balloon to expand to such a degree (typically by a 100:1 factor) that it disintegrates- leaving the remains to fall back to earth.

For those of you who can recall middle/primary school science class, the Earth has five principle layers in the atmosphere.  The two closest to the ground are the troposphere (up to 20km) and stratosphere (20-50km).  Most of the phenomena we associate with day-to-day weather occur in the troposphere, including clouds; which stop at the tropopause- the border between the troposphere and stratosphere.

Wballoon

Since the October breakout, and subsequent retest, the SPX has remained well-above the clouds and the 400day MAs since November.

Breakout

The question is – has price broken the tropopause?  Or is there more room overhead as, much like the troposphere, it is variable depending on latitude (which in this metaphor is a bull/bear market)?

Just eyeballing the SPX altitude since 2007, we have had 3 instances of a significant post-altitude drop (purple boxes) and 4 instances [or 2 long ones…] with only minor pullbacks (orange).  Notice the rising Senkou parallels such a price rise, and is doing so again today:

Altitude

I don’t think anyone questions if this debt-filled balloon will disintegrate, but when.  Given that we’re probably approaching the stratosphere- I closed all longs today.  I would be more comfortable entering long again on a small pullback, but would hesitate to short until the full cloud is breached.

 

 “One minute you're up half a million in soybeans and the next, boom, your kids don't go to college and they've repossessed your Bentley.”

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