All the 5 indices I cover, have been pushing to new record highs and has even formed a very small double top. In this market that little double top has no real importance as it can get exceeded by the time I finish posting. There is no fundamental logic to all of this even when the government shuts down. The threat of a government shutdown has been going on for decades, and I have ignored all of them most of the time. It seems like the government is just showboating more than any real attempt to balance the books.
It is the changing of the FED that is more important, Trump Announces Jerome Powell as New Fed Chairman – The New York Times. I will keep working the Decenber move as a 4th wave, but wave 3-4 can be an “AB” move as well. At this stage of the game anything can happen. After 2 years with this 5th wave extension, there have only been very small corrections, which cannot be maintained. We need a big correction, and falling back to the December sideways move is the bare minimum we would need, if another super leg up were still to happen. In the long run the SP500 will crash or turn into a big bear market. The higher these markets go the bigger and deeper these markets will head down to.
Every contrarian, I respect knows what’s coming as they track fund flows and insider buying and selling. Some say not to worry about insider selling as they are just taking profits. What a pile of crap this logic is, as insiders don’t do the same thing as the public does. They buy and sell their own stocks because they understand the big picture of the business cycle very well.
Sure, this could go on an on for some time yet, but markets have a nasty habit of surprising as many participants as it can. Since 2000 we’ve had two major bear markets or crashes, and a third is on its way, yet the majority of participants are not any smarter. The fourth big peak may not happen until 2029 and the 5th one could take until 2129.
Once the race for the lifeboats starts, there will be a panic situation when they realize there are not enough lifeboats available to get everybody out. They key is capital preservation and the majority has never been good at doing that. Only the majority is dumb enough to invest in an extreme top, when the probabilities of a crash are more likely to happen.