I posted a chart on how a trend line from 1987 passing thru 2000 top was hit at SPX 2656 and i got called a dingbat by a senior citizen. It’s hard to post anything which both the bull and bear camp loves. But you know what, that’s the reader’s problem for lack of open mindedness to accept any ideas contrary to their biases. Not to mention the low emotional quotient of the same people, EQ being the most important trait of a trader.
I am not new to this. During 2006 and 2007 when i was very bullish, i got horrible e-mails from frustrated bears. There was even a thread created on Silicon Investor “Fade the NAV”. It was horrible.
I am not playing devils’s advocate here, but i will just keep throwing information, that i find interesting.
I was listening to a podcast with Tom McLellan and he mentioned a very interesting stuff. According to their study, when the NYSE A/D line makes a new 3 year high, the market has never produced a decline greater than 10%. So odds of decline greater then 10% here, with all the data available over last 100 years or so since the breadth statistics have been collected is ZERO. A new high obviously means no divergence.
Now that does not mean, it is impossible. But if you are betting on ZERO percent odds, what kind of a sick gambler are you ? That is the bottom line.
So to make the long story short, yes the trendline touch from 1987 at 2656 and the some Fib extension targets at that level, could cause a big reaction here, but will not be the ultimate top, based on the highly reliable A/D line. So when i hear people calling this the ultimate top and calling for 30% or 50% decline, i view that with extreme skepticism. Sorry bears, you may get a 5-10% decline here. But anything more than that would mean history has to be “created” as we have no precedent for that.
My own view (not a hard target) is that when the 2.618 Fib extension is exceeded and sustained it will eventually reach 3.618 extension. I see this all the time in my short term trading. Many times, folks ask me how did i exit right near a top when i did not get a technical exit. Now you know the magic.
And that 3.618 extension (off the SPX 666 lows) comes to around SPX 3087. If we see A/D line divergences there, we could see a big top there. We will cross that bridge when we come to it. Until then, happy trading !
Edited by NAV, 02 December 2017 - 02:40 AM.