Inertia
“A body in motion will remain in motion until acted upon by an equal and opposite force.” Basic tenet of physics. Boy, has that been true with the stock market, especially the FAANGS. I have been wrong in thinking they would have topped by now, but the evidence is mounting that we are almost there. Not withstanding the most important factor this late in the year and the bull market, the calendar, here is what I am talking about. First, we had the first correction in months not long ago and bounced to new highs. This final leg up has shown deteriorating technicals, most notably a lagging advance/decline line and a shift in the number of new lows vs. new highs. That along with extremely bullish sentiment, with out right speculation at a fever pitch, including the premiums on calls exceeding those on puts on the NASDAQ, as I pointed out in a recent post. These are all flashing warning signs but are not an exact timing mechanism. My biggest mistake is that because we are so close to year end, it is likely that the actual rollover and crash won’t happen until after the new year begins. Because of the tax code, capital gain rules etc. there is very little incentive to take profits before Jan.1. So we wait and hope the downside deluge doesn’t begin until then. After the FED announcement we should see some selling but get a final year end bounce before the real selling starts in early January. If that is the case I will be ready to take positions to play the expected decline.
Friday’s market meltdown was a double purposed “shot across the bow”. To us market participants and technicians, it is confirmation that the bull market has topped and after a likely bounce(don’t know yet if lasts until year end or is a much shorter bounce. To the Congress I believe it was to put them on notice to fund the govt. before this Friday’s deadline is upon us once again.
Socrates (Armstrong’s computer) has forecast Feb 2022 as a major trend change for the stock markets. Have watched his predictions for many many years and he almost always nails the turning dates. I’ll be fully invested until late January.
Good to know about Armstrong’s record. I look forward to seeing if he nails it. Thanks, KenS.