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Let’s Not Fall Into The Gap: Balance and Harmony Pay Well Indeed
We have been aware market volume peaked last March at the bottom. This is often a characteristic of declining markets.
We are also aware the market has gotten more choppy (volatile) as of late, with VIX and VXN perhaps headed much higher:
http://stockcharts.com/charts/gallery.html?s=vix
The leading Transports are diverging down from the Industrials:
http://stockcharts.com/charts/gallery.html?s=%24tran%3A%24indu
We are well aware our Weekly Big4 Asset Allocation Report ($2000 with One Year Moneyback Guarantee) is short some of the most popular longs, in the past a pretty reliable indicator of market tops.
We note the 30 October 2009 debut of the 28 stock ChiNext Nasdaq-style board in Shenzhen triggered 10% circuit breakers on the way up, with some stocks gaining 210% the first day.
http://www.google.com/hostednews/afp/article/ALeqM5hZqcbumxDy8kPz3Z4SAxIRVzexiQ
This kind of speculative euphoria can mark tops.
So we ask ourselves, quite often now, What if one day we wake up and Mr Market doesn’t, a Black Wednesday?
In other words, a serious air pocket like 1987, as hedge funds and investment banks unload, with market makers and specialists scrambling to keep up?
We recall 1987 pretty well, as we organized a late August seminar at the peak in Manhattan called The End of The Trend, regarding hedging any market decline with convertibles. We contacted the usual suspects, who were quite receptive. In fact, nobody came. The Chemical Club was kind enough to not charge for an empty room with a breathtaking view of the Harbour.
The rest was history, as the market peaked on the Harmonic Convergence.
