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Sunday, December 13, 2015

Sunday, 12/13/15 update

From last weekend's post:
"In recent years the equity markets have been doing an excellent job of training folks to always "buy the dip".  That strategy was certainly successful this last week.  One of these days a whole lot of bulls are going to get trapped by that mentality."  

I made this comment because of concerns based on the following chart:


Note that since late October the S&P 500 (top chart) has been much stronger than the broader market as represented by the NYSE Composite (bottom chart).  This is a great big flashing yellow light on the highway to bull market bliss.  Can the ES/SPX shake off last weeks bear action and go on to new all time highs?  Sure it can, but if the broader market doesn't quickly follow suit then those new ATH's are liable to mark the last gasp before a significant change in long term trend.

If the ES/SPX doesn't turn back up soon, below are a couple of bear market possibilities.  Both of these alternates assume that Primary Wave IV of the bull market off the 2009 lows is still in progress.  Primary Wave II lasted 8 months, Primary W IV commenced last May, so a couple more months for the move would be in proportion:

Bear alternate #1 - multiple zig-zag 

 Bear alternate #2 - triangle

One final thought.  Imagine you are a portfolio manager or financial adviser.  It's Friday, Dec 11.  There are only 3 weeks left until the end of the year when results for the year are locked in and subsequently reported to and evaluated by clients and potential clients.  You have a very short time remaining to spiff things up, only 13 more trading days, and two of those days are holiday eves when there isn't a whole lot of market participation.  Meanwhile, interest rates are going up, commodities are crashing and the wheels are coming off the equity markets.  What are you going to do on Monday? 
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