A surprising day yesterday. Russell 2000 up 2.75%, and all US indices popped strongly. Clearly nothing to do with Ukraine. If we look beyond price, not much has changed. There is still a momentum divergence on this new high. The Russell 2000 is up 15 out of 16 days, which is a record. Indicators suggest this is more likely to be an overshoot rather than a breakout. Put/call is sub 1 for 5 months now, and is 5 days away from an all-time record. Skew is is also 5 months at historic elevation levels. Investors Intelligence sentiment is back to extreme (see below). I remain confident a crash is ahead, but yesterday’s action has made the short term picture less clear. For that reason I did not add further short positions into the rip. So let’s see how today unfolds, I expect more clarity by tomorrow/Friday.
I leave you with a few charts, which are hopefully self-explanatory. At the bottom I looked to see how the Dow’s parabolic ascent into 2007’s peak terminated, which may give us clues about how the Nasdaq’s current parabolic could feasibly resolve if this short term action is an overshoot before renewed downside. The Dow made a higher high then a lower low, which was the definitive kill of the parabolic. The Nasdaq has made a higher high, but remains in the parabolic until we see a lower low.