Last week I wrote a TraderPlanet piece headlined “The SPX Is Going To Crash”. That headline was an eye grabber, and the amount of email I received asking when the next turn date was predicted suggests traders are on pins and needles.
Everyone wants to be bullish and everyone wants to believe that the Central Banks will never let this market down, but they will only believe that with one hand on the “sell everything” button.
There is a lot of confusion as to why the indexes are at these levels. Some say the indexes are a leading indicator of the economy and we will see a big economic boom soon, but with every passing month, we only see the economy maintain its “status quo” of “getting better, but slowly”.
The previous highs in 2000 and 2007 made sense, as they were from an Internet and real estate bubble. But nobody understands what a “Fed bubble” is and what to expect and how it will end.
When there is confusion, it automatically releases the uncertainty emotion. With uncertainty comes caution. Most want to ride this bull as far and high as it will go. But everybody wants to know when it will really be over and when they will have to sell everything.
Long term sentiment will identify that time period, just like it has every other important top.
Our STI (Sentiment Timing Index) is at extreme bullish readings and expecting a 2%-4% drop makes sense, however, the “Trend Duration Analysis” is saying to expect higher highs by years end.
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