June 11, 2019
At the end of May, the old guard was crowing about the completion of a head and shoulders top. Cramer and associates plus a chorus of perm-a-bulls started to become bearish when the market gapped lower. I pointed out that traditional TA could not make that call with a higher chance of success than 50/50 because the break would not get carry over without consideration of the context behind it.
I pointed out that the short-term background had the market’s May decline labeled old, laboring and due for a change on June 2, and the breakdown of the head and shoulders was a trap. And now the man who would be a guru says the market is frothy. Well, he is right, but he is still a perm-a-bull. Here is what he was quoted as saying:
“…watch now CNBC’s Jim Cramer said Monday it’s a tough time to put new money into stocks, even as the market posts gains. The Dow Jones Industrial Average added more than 78 points Monday, the S&P 500 expanded 0.47% and the Nasdaq Composite moved up 1.05%. Cramer said investors […] Click here to view original web page at Cramer: Beware of froth — ‘it may be too late to put new money to work’
Well, there may be a leak in my membership, which is talking to Jim’s TA, that can be fixed. However, all of the primary stock market averages on Monday hit panic buying extreme. My Technical Event Model reached a rule #1, an extreme that calls for a change of trend because of emotional buyers are easy to flip.
The chart here also reveals that time cycle flipped on the Dow ( and others ) to the short side at the low – the odds and other risk/reward stats for this 100% time and price based strategy is on the left-hand side, and there is no money management used. It’s purely technical.
With the markets in a state of panic buying, aka FOMO, and cycles pointing lower into the end of June, ContraryThinker believes that Cramer is right that the market is frothy. However, it’s just not the short term, it is also the Intermediate and Long Term context that supports the downtrend from late April.