This Russell 2000 cash chart did not travel to new record highs like many of the other indices. This puts it on a different path or ahead of the rest of the group. If this is happening, then we should also see its bottom a bit earlier than all the rest. With the 2015 peak possibly being the Cycle degree wave III top, then we should be looking for a Cycle degree 4th wave correction.
As much as many would like to see this implosion, the level of optimism has still been at an extreme in the last few weeks.
With 70 trillion in cash they say the markets can only go up. Many other mainstream analysts have also been very bullish, but who says that the mainstream is right? It is next to impossible for a market that is extremely bullish to add on another huge leg to the upside without a correction. At every major peak when the majority were bullish, these markets would turn and crash.
Is it going to be different this time? The only difference is that the 2015 peak is 8 years into the future from the 2007 peak. The advancement of time always makes it different, but what never changes are the human emotions that swing from extreme optimism back to an extreme pessimistic mood. Every major contrarian knows this instinctively and getting caught up in the mood is the worst thing any wave analyst can also make.
This market is not going to go straight down as we have at least 3 simple core patterns, that can happen. A Cycle degree zigzag and a Cycle degree triangle are not an option at this time. The triangle would take far too long, to play out by 2021, and the zigzag does not alternate enough, from the 1937-1942 bear market.