What concerns me most about this peak is the complacency. The word I heard most on Friday was ‘soft patch’ again. What can I tell you, our favorite media types are just messengers to the sentiment on the floor of the exchange. But the term soft patch dredges up bad memories for me and it should for you as well. The last time we heard the term was in May 2011 which preceded the debt ceiling negotiations and the first European crisis. I’d much rather them tell us there’s going to be a recession. Why? The media always gets the sentiment wrong but at least we have a very high correlation of what it really means. I will tell you this, there’s a certain amount of negativity coming out of the tube as these disappointing jobs numbers are starting to wear people out. I’d be more encouraged if I didn’t hear the ‘soft patch’ bandied about. That tells me this new move off the high is not done even if the SPX goes on to set the record.
We’ve now reached the stage in the peaking process where we can end up with divergences and non-confirmations. Remember 2011, they started talking soft patch in February right at the start of the Libyan campaign. Markets fell back and bottomed right in that Japanese disaster but finally made the final high for the sequence in May with our perfect storm of a top in the oil market the day after they got Osama Bin Laden. My clients know that oil peak was a perfect confluence where Gann met Fibonacci at 903dg on a square of 9 at 609 trading days up. The theme through it all? You never heard them STOP talking about the soft patch. So here we are again and it doesn’t provide any comfort.