Was reviewing 1991 scenario. Even in that rally, the initial price movement was completed in 36 trading days, in a clear five-wave advance.
Dow actually led this leg, and was then followed by Nasdaq.
In those 36 days:
DJIA: 2450 -> 3000 +22%
NASDAQ: 350 -> 475 +36% avg. 1%/day
Naz continued on another month, to 515
If we *are* in a similar wave structure, we are probably still within wave 1. However, I think the wide anticipation probably shifted much of the price movement into this wave.
1991 had only one clear short-covering all-aboard kind of day, a 4% pop in the Dow, accompanied by a similar 4% pop in the Nasdaq - ie no chasing the speculative issues.
Contrast that with this rally's clear flight to trash. We've already popped 17% on SOX, 14% on NDX, 12% on COMP, 11% on DJIA, 10% on SPX.
Since SOX has replaced DJIA as the blue-chip "safe" index, I would suggest that the price movement on it will top out first. The safest ways to fade this would be short SMH with a long SPX hedge.
Naturally, this is a reversal of what I've been doing - shorting non-tech, with a QQQ+SMH hedge. <ng>
Thoughts?
BC |
