Yellen said that she sees no bubble, so maybe she want to show the world that she can create one! ;-)
More seriously, yesterday price action in the S&P500 and some of the underlying sectors has increased significantly the probability of a blow off top. The move from February to the intermediate top in May is a perfect example of what I would expect to happen.
Some people have tried to build models of parabolic moves and this is probably the best model around for the more mathematically inclined: http://www.hussmanfunds.com/wmc/wmc130415.htm
This is what these models look like, they point to a top in late dec/early jan:
In my charts below you can find:
- The move up in May
- My target area for the movement: between 2040 and 2200. Big caveat: it is very difficult to project in advance a target for a parabolic move and indicators/oscillators become meaningless. Volume is probably the only input that we can use, in the sense that we should see an higher than average volume at the end of the move (silver in 2011 is probably the best example)
- Charts of staples and discretionary (but you can look at industrials, healthcare or materials, they all show the same behaviour) that shows clearly how we have broken consolidations area on the upside
Analysis
The technical reason is a breakout on the upside of a wedge pattern. A wedge is a reversal pattern and price is âexpectedâ to break on the downside. If it breaks on the upside, it signals an increase in acceleration and it is even more reliable because of the low probability of this occurring ( a bit convoluted I admit)
May 2013
S&P500
STAPLES
DISCRETIONARY
http://pentothalta.blogspot.co.uk/
More seriously, yesterday price action in the S&P500 and some of the underlying sectors has increased significantly the probability of a blow off top. The move from February to the intermediate top in May is a perfect example of what I would expect to happen.
Some people have tried to build models of parabolic moves and this is probably the best model around for the more mathematically inclined: http://www.hussmanfunds.com/wmc/wmc130415.htm
This is what these models look like, they point to a top in late dec/early jan:
In my charts below you can find:
- The move up in May
- My target area for the movement: between 2040 and 2200. Big caveat: it is very difficult to project in advance a target for a parabolic move and indicators/oscillators become meaningless. Volume is probably the only input that we can use, in the sense that we should see an higher than average volume at the end of the move (silver in 2011 is probably the best example)
- Charts of staples and discretionary (but you can look at industrials, healthcare or materials, they all show the same behaviour) that shows clearly how we have broken consolidations area on the upside
Analysis
The technical reason is a breakout on the upside of a wedge pattern. A wedge is a reversal pattern and price is âexpectedâ to break on the downside. If it breaks on the upside, it signals an increase in acceleration and it is even more reliable because of the low probability of this occurring ( a bit convoluted I admit)
May 2013
S&P500
STAPLES
DISCRETIONARY
http://pentothalta.blogspot.co.uk/
.;;extended on 3 year charts[SPY]