May 16, 2013

Some thoughts

What the history tels us - bellow are the occasions from the bull market 2003-2007 and the current bull market when we had similar moves like the current one - longer than 120 trading days without any correction(6% or bigger sell off):
06.Aug 2003 - 08.Mar 2004 - 159 TD - 20,5% -> very long sideway move (at the begging of the bull market)
18.Jul 2006 - 22.Feb 2007 - 155 TD - 20% -> sharp and short living correction and final rally before bear market
27.Aug 2010 - 18.Feb 2011 - 121 TD - 29% -> sharp and short living correction and final rally before severe drop

I think the last two occasions are relevant and we will witness something similar(the first one appeared when the bull was still very young).
How the indicators looked like:
- on the daily chart no signs for trouble, no double tops or retest of the high, no MACD divergence..... nothing.
- on the weekly chart - RSI extreme and histogram divergence
- the sell offs were very sharp, came suddenly from nowhere, everybody is rushing trough the exits.

Current rally 16.Nov 2013 - still running - 120 TD - 23,7%

Now the indicators daily and weekly show the same picture and the current move looks even parabolic compared to the other two.
It is interesting that without knowing my forecast mirrors what history says. It will not repeat 1:1 but it will rhyme. So I do not see a reason to change my forecast - one day suddenly a sharp correction will start but for 3-4 weeks followed by another rally which should be either the end of the bull market or important top before severe correction of 20%-25%. That is what the history says, let's see if it will repeat.

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