A double top here on the SP500 or another breakout to new highs? Below shows Aug 8th was another channel hold, so is it bull-business as usual or has something changed?
The vertical dotted lines show the last two times Nymo surged from oversold to overbought like now: one chopped sideways and one retreated. The CPCE and Vix indicators show that there were some changes under the hood in the last couple of months: possible capitulation in the Vix and big volatility in put/call. These developments may have meaning because the Sornette bubble end flagged at that time:
There are also several negative divergences now in place in breadth, bullish percent and volume, with the July peak:
Volume has been particularly weak on this rally whilst continuing to be dominant on down days recently. The relevance of that is shown here, i.e. often associated with significant peaks:
Source: Dana Lyons
Trin closed low yesterday at 0.5 and suggests sideways chop then pullback may be next, previous occurrences in yellow below:
Source: U Karlewitz
The new moon is on Monday and therefore we might expect the markets to roll over after that.
The European markets were weak yesterday. Below is the German Dax performance relative to the SP500 over time. Such notable divergence has previously been associated with major peaks:
US small caps underperformed yesterday and the Nasdaq gave back all its day’s gains in the last 15 minutes.
In summary, the stronger case is for the rally to end here. A marginal higher high on SP500 would not negate that. Around this weekend’s new moon is the most likely scene for that to occur if it is to. But effectively a double top, with indicators and divergences calling for chop-then-retreat or just retreat. The two longer term charts above add to the comprehensive case for this being a major peak, and along with Rydex, II sentiment, Skew, sector rotation and risk-measure peaks call for the top being ripe or through.
The evidence still supports the sequence of events: risk peaked 31 Dec 2013 (HYG:TLT, INDU:GLD, XLY:XLU and more); speculation peaked Feb/Mar 2014 (smoothed solar max, margin debt, IBB, SOCL, RUT) and the topping sequence completed in July (European indices, Dow, Sornette bubble, various indicator completions). So the last week in August – next week – is important. If it is an up-week then it will cast doubt on some of those peaks, if it is a down-week it will further cement them.
The united picture of solar maxima and valuations and the relevance of 1937 to now: