I don't buy it

Here is some more evidence that this rally is a sucker's rally.

On the 1h chart above, notice that Wave2 was flat and lengthy. By the rule of alternation, Wave4 should be fast and sharp, exactly what we got. Notice that it looks like an irregular 4th wave following the 3-3-5 pattern. If this is correct, we should start the 5th wave drop early next week.

I  believe Wave5 will be very sharp based on how bullish current market sentiment is. Take a look at the CBOE Put/Call chart above. Notice that the 5dma is at record lows. Since the market usually burns the majority, I would expect the market to drop quickly. I think the real low will register a reading near 1.1-1.2 on the 5dma Put/Call ratio.

Also, take a look at the blogs on the list to the right. Out of the 9 that I check daily, 6 are bullish (Carl Futia, Will Wrahal, Kevin, Slope, Elliot Wave Lives On, Smart Money Tracker), 1 is unsure (Evilspeculator), 1 is neutral (Bespoke), and 1 is bearish (Xtrends). It's true, it does seem like a bottom, but since everyone has turned bullish, I have to conclude that we will make new lows soon.


Joseph said...

I dont post much, however which way this pans out is what the smart money is doing. Hence if you view various sources and connections the smart money just dipped their toe in last week. The Rally is a sucker rally. Hope were right..... Cheers, Joey

Narayana said...

Yeah, volume was incredibly low last week on DIA, SPY, IWM, QQQQ vs. the previous week. That's an indication that the smart money hasn't quite stepped in yet.