Just about everybody on Wall Street is in buy mode with anticipation of higher levels because of the Santa Rally. We may continue to grind higher for the next week or so-but buyer/bull beware, as things may not be as rosy as you think.
Our sentiment cycle triggered a bullish extreme on November 27 with an expected trend reversal date between 11/29/13-12/16/13. The 29 did mark the top and the S&P 500 dropped some 20 points. But the wave count is leaving the door open for the low we saw as a wave 4 with a wave 5 higher to follow.
WHY THE RISK IS SKEWED AGAINST THE BULLS HERE
With our sentiment cycle looking for a top in the coming weeks, the wave count is also supporting that view as well. If we need to see a higher high, it may be 1%-2% higher than the previous highs made-maybe. But there is still an above average chance that we are just testing the previous highs and the next sharp move will be to the downside-in the range of 8%-15% and lasting for a few months.
The financial world is very complex and has to be running on all cylinders in all currencies. If you see a divergence in the price of the Dow in USD dollars compared to euros, it is a sign that things are not as rosy as they may appear on the surface.
This is exactly what we have been seeing for the last April, the Dow making new highs in USD, but making lower highs in Euros. With Sentiment-wave structure and the divergence with the Dow in USD-Euros, be ready for the unexpected.
With margin levels near record highs for the last 15 years that 8%-15% drop can come very quickly.
