September 15, 2018
1. Prices are high relative to traditional measures
2. Prices are discounting future rapid price appreciation from these high levels
3. There is the broad bullish sentiment
4. Purchases are being financed with high leverage
5. Buyers have made exceptionally extended forward purchases, such as of inventories, to speculate or to protect against price appreciation
6. New buyers have entered the market
7. Simulative monetary policy threatens to inflate the bubble even more.
We have pointed out number six above based on our modeling.
Our measures of volatility show that from October 2017 into the January peak the buying was based on fear of missing out FOMO. The Technical Event Model was in a sustained period of panic buying. Something that is normally an event not an ongoing condition. These late cycle buyers will flip out at the first sign of pressure on their account balance.
In fact, the February decline stopped right at their break-even level of these FOMO players; and from a long-term point of view our targets for the bear takes prices back the surprises Trump win in late 2016.
The chart here has they period of panic highlighted.
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Great and Many Thanks,
Jack F. Cahn, CMT
A Thinking Man’s Trader Since 1989,
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