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Final Pillar Of Bull Market Showing Cracks?
By Dana Lyons, partner at J. Lyons Fund Management and founder of My401kPro.com
Final Pillar Of Bull Market Showing Cracks?

We have repeated ad nauseam the litany of concerns we have regarding the longer-term fate of the U.S. stock market. These concerns include metrics pertaining to price proximity to trend, valuation, sentiment, investor allocation, investor leverage, corporate profligacy and on and on and on. Our biggest problem with these conditions are that such excesses of the prior secular bull market, in our view, were not adequately corrected in the subsequent secular bear market. Thus, we find it a reach to consider that the necessary conditions were in place to support a new sustainable secular bull market – particularly one in which many of the same excesses have so hastily reemerged. That said, we have also taken great care to emphasize the one factor which has remained favorable and which trumps all of the concerns above: price action. Unfortunately for the bulls, this last and most crucial pillar of the bull market is now too potentially showing signs of vulnerability.
The most bullish thing stocks can do is go up, especially to an all-time high. And as recently as last month, many of the broad stock averages were continuing to make new highs, including the Russell 2000 small cap index, the NYSE Composite, the S&P 500 Equal-Weight Index and even the NYSE Advance-Decline Line. This was important as it showed that the persistence of the bull market rally was evident across a wide range of stocks, not just a few top-heavy large cap indexes.
Another broad index at new highs was the Value Line Geometric Composite (VLG). The VLG is an unweighted index of approximately 1700 stocks and is a favorite of ours in gauging the level of participation among the broad universe of stocks. We posted a piece on it July 2 of last year noting the fact that it was bumping against the same level that saw the index top out at in both 1998 and 2007. Sure enough, the VLG peaked the very next day, setting up the makings of a possible but most improbable 26-year triple top. That July peak held until February when the index finally broke above the triple top level. After a test of the breakout level in March, the index moved to new highs again in April. However, over the last few weeks, the VLG’s triple top breakout has shown initial signs of cracking.

The recent bout of market weakness has hit the small cap stocks especially hard. This has had an impact on the VLG. Not only has the index now lost the level signifying the 26-year triple top, it has also violated the up trendline from the October low of last year.

Now of course this weakness is very short-term and does not guarantee the longer-term failure at these levels. That is why we say it is showing “initial” signs of cracking. Who knows, the index could be up 4% next week to an all-time high and this development will be irrelevant. However, considering the level at which this weakness is occurring as well as the list concerns already in place, the risk is that this too will develop into trouble of a longer-term nature. It would also put the 26-year triple top potential back on the table considering the possible false breakout.
This, again, is just a preliminary breakdown in price. However, it is concerning as positive price action has been the one remaining pillar supporting the bull market – and the only one that can overcome all of the ancillary concerns pertaining to stocks. However, it too is potentially starting to show some cracks.
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It's all about the debt. The Dow Jones Industrials are within days of a peak. When the trend turns downward, the stock markets will fall sharply and relentlessly...
http://www.globaldeflationnews.com/dow-jones-industrial-averageelliott-w...
Bull markets dont give you three chances to get out at the high - there is always a blow off top!
Wrong. There is NOT always a blow off top. Regardless - if it makes you feel better IF there is a blow off top, there is a school of thought that says we have been encountering a slow upward trending blowoff for quite some time.
Given how different it REALLY is this time - the slow motion blowoff could in fact be happening. Another thing to note is that NEVER at "tops" have we had HFTs and Algos contributing to driving up the market and holding levels.
And with the amount of money leaving the market, we now have a market that is driven up (aside from thge HFTs and Algos) by little moire than Stock buy backs and Pension Obligation Bond buying. Since both of these are programatic purchases, there is NO reason to expect a "blow off" as has happened on occassion.
But, Yen Cross told me (not nicely) there isn't any such thing as a triple-top breakout!
Who am I to believe?
There isn't. In order to have a true triple top the indicator must retrace all of the move from the failed double top back down, and then climb back up and break out of the previous high.
The end result is a double top failure that fails to retrace the entire move, and becomes a double top breakout when the previous high is breached, and closes above.
Lets discuss measured distances.
you should post how many times in the last couple years this guy said something like a market top is coming...my guess it is quite a list...
In other news, ISIS takes Ramadi in Iraq where the Iraqi army has a shitload of military hardware... the US is even thinking about bombing the Iraqi military bases in the city so the hardware doesn't fall in ISIS hands... cause there's LOTS OF IT.
Also, Saudi Arabia is planning to buy nukes from Pakistan this summer... wanna bet this is never gonna air on US news??
http://www.thesundaytimes.co.uk/sto/news/world_news/Middle_East/article1...
Change You Can Believe In!
Thanks Barry!
'JV team'....as told by a guy who cant throw out the first pitch...even with his sassy mom jeans
Ending Diagonal Triangles are terminal.
Sovereign and corporate debt as well as CB's printing fiat and buying indexes globally has been the only "base" for this Bullshit run in stocks. This "foundation" has literally been built on paper machete. Eventually the foundation will fail and then the house will come tumbling down.
Its beyond it's peak problem is the fed and the banks are doing everything they can to prevent free market value, but their shortfalls are coming and it's going to end badly.
I predict the market will plummet when the "initial claims" metric turns up for more than a few weeks. Initial claims are still going down, so the market remains bullish.
the absurdity of all the bulls/bears bs in the context of free money is staggerin'. why does ZH go along with it?
IMO, ZH has become 90% click bait, but It's something one has to tolerate for the 10% of good-to-excellent articles. The latter percentage was a lot higher when ZH started out.
at least 60% - regretably.
That "trendline" in the lower chart is missing 2 big minima in Dec 14 and Jan 15. It starts at the low price in Oct 14 but intersects the closing prices in Jan and Mar 15.
I would venture that its predictive value is no higher than tossing coins.
Nothing says bull market like "anarchy everywhere."
hahahahahahahahaha. nice
Break out, consolidate, over and over. Do not short.
SPY is back up to 32% short interest..
that is why the invisible hand started dumping treasuries, to attempt to start the great rotation into stocks.
hasnt worked yet, but I expect the squeeze to commence.
Yup and the financial decay will be confirmed in three minutes when the globex opens futures at new all time highs and they proceeded higher and higher year after year for the rest of all our lives.
so btfath then?
The top in October 1987 actually began in June of that year and the "boys" did everything they could do keep it going (and did) until October 16th a Friday when it got smoked for over 100 points (from Dow 2736) and then all hell broke loose. Germany played a large part in that crash and they will this time as well. Ten Central Bankers are dancing and drinking and there are only eight chairs and the saxophone player is about to throw up in the front row. Sell EVERYTHING that is based on a "business model" and load up on everything that is based upon resource extraction...how about zinc??? Central bankers don't care about it and it is going into shortage...