Stock market starts waiting game for next bubble

Fibonacci Forecaster

The elusive top -- when is it going to materialize? Will it materialize? I never thought I hear this with my own ears, but we are on the cusp of another bubble. If you look at the SPX long-term chart, it contradicts what I put in my article on bubbles in Futures magazine last month, but when a pattern fails to correct when it’s supposed to correct, that’s the first warning sign.

Look at these two famous charts from recent history. These are the lead ins to the parabolic phases of the collective moves. I couldn’t classify them as wedges although they are at least symmetrical triangles. Sometimes the slope isn’t steep enough to be an ending wedge but other times it could go either way. The first chart is the 99 NASDAQ and the chart below is the 2009 Silver weekly on a long term continuation. This is the base that generally needs to be identified at the formation of a bubble. We know the NASDAQ was a bubble for certain but precious metals had elements both psychologically and technically as well. Now look at the 3rd chart which represents the oil market. It looks more like a symmetrical triangle as opposed to an ending wedge. We are in a situation where the US came close to a default if anyone really believes that. However you can’t be thrilled about the idea any segment of politicians would use it as leverage. So what happens? The bond market goes through the roof and the equity market continues on its merry way. The only one getting hurt here is the US Dollar where hopeful maybe traders who went long got spanked just as soon as the government reopened.

Technically, we are not at a bubble status yet, but we are getting close. In terms of time we hit larger time windows in the past 6 weeks and bore no fruit. Right now we have another opportunity this week as the equity markets hit 89 days off that great June bottom. I never hope for the stock market to correct but we need a correction.

Next page: A look at the Dax...

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