Because the bulls are running out of room and time. The following pic should illustrate it well at the link below. 5 waves up in an ending diagonal rising wedge complete. Waves 1, 3 and 5 are 3 wave subdivisions as they usually are in ending diagonals which means it is a terminal pattern. While I have channels drawn in blue for these waves, note how you do not have all 4 points required to make the channel, namely within the channel the boundaries of the channel should touch high of wave 1, low of wave 2, high of wave 3 and low of wave 4. Only in the very last wave can you draw it this way with the 4 points touching, but if you can't do it in all three channels then you don't do it at all and you look for potential 3 wave subdivisions instead. waves 2 and 4 of the ending diagonal are in yellow. the red letters denote the blue channel a-b-c structures and the black letters denote the corrective wave 2 and 4 structures.
raptorgroupresearch.com
Finally, a look at the daily shows a highly compressed stochastics signal that is overbought. I would be crazy to go long or cover shorts here with an overbought compression signal like this. MACD convergence signal will also meet stochastics in overbought very soon which pretty much always makes a sell signal and you can see from the chart that convergence on a daily chart is rare. In fact, if you go back 500 days on the daily chart, you'll see that there were only 3 occasions that the MACD convergence was higher...January 31, 2001 right before the Nasdaq plunged by 45%, mid May 2001 right before the Nasdaq plunged 40%, and Dec 5, 2001 right before the Nasdaq went on to make a divergent high at 2100 but then plunged 43%. Currently it is matching the signal height made in March of this year that marked the top in the DOW and S&P.
raptorgroupresearch.com
McClellen Oscillator by the way is at it's highest point ever in the last 3 years. It has always sold off every time it reached 180 or so and now stands at about 220. The O/B indicator has only registered more overbought (and not by much) on 4 other occasions).
Would I go long or cover shorts here? Absolutely not.
I am withholding the rest of the chart and indicator evidence as they have been laid out for subs. |
