The collision of global markets and social mood

Monday, August 3, 2015


No idea who Thad Beversdorf is, but this article is the best thing I've read in a while (if you think the rally since 2009 is a house of cards).

Been having such fun in the sun that I had no idea that the latest GDP report showed that the past 4 years of economic growth had been overstated.

Thankfully Beversdorf noticed.

He commented, "absolutely no price recalibration took place. This really evidences beyond any doubt that there is no relationship between the economy and the market. It further evidences the Fed’s increased proficiency in directly guiding the market."

He also threw cold water on the "everyone is bearish" narrative.

"To watch the market’s blatant irreverence toward a report that, with the flip of a switch, removed 12% of the presumed economic growth from the past 4 years did strike me as remarkable."


Once again, this brings the 2011 lows into focus -- 1074.77 -- a level I've been viewing as a fulcrum since the market took off from there (actually it was July 2012 when I threw my hands up/nearly threw up).

I see it as a pivot point which will eventually be broken, but perhaps not until there is a correction equivalent in magnitude to 2011 followed by a rally that develops into pure mania.

Beversdorf also noted that current EPS is more than twice the level of 2000's overvaluation while revenues have remained virtually flat since 2007.

"When revenue growth is driven by debt consumption it is temporary. And we all learned that cold, hard fact in 2008.  ...And so what we have is earnings growth pushing stock valuations massively higher but without the consumer onboard. Very different from the credit bubble."

Very scary when it eventually ends.

Yet as long as 2044.02 holds, buying pressure is likely to remain. Should a new high develop, 2197.84 is the maximum upper target under the ending diagonal scenario. I doubt it would be reached.

A better scenario would be a rally to a new high above 2134.72, then a brief "continuation" that sucks everyone in, possibly accompanied by "great news," then a sharp reversal, and a close below the breakout. 2044.02 would then fail quickly.

This would be what Elliotticians call a "throwover." It's also called a failed breakout.

Others call it "Turtle Soup."

The target would be 1800.

So far, however, it's just a scenario.

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