I'm adding some thoughts to the comment cleaner just because I've come to the quite obvious though also surprising realization that we've already had 3 OpEx in 2012, and no change yet to the overall theme: higher and higher we go. We've made a new high in each OpEx week... and as our friend above would point out, it's been all bulls, no bears, and most likely anyone short already has been squeezed like fresh orange juice.
Will the trend change? It may not, because it's impossible to deny there have been breakouts across the board, and VIX is enjoying teenage existence.
But at the same time, one has to think bull by now is quite extended/overdone (opponents to that would likely use mfc's line "we're overbought :)), and assuming the even greater context is still bear, there will come payback or a huge natural correction in the coming months.
When? One little amateurish observation that I did over the past week (where I was away taking a break as it had been much needed) was a little study on other extended IT bulls we've seen since I've been aware. The objective was to see what happened after the bull was done, what the character of the IT bear to
March 2009 -> May 2009: Needless to say this one came immediately out of LT bottom (in fact, this was before I joined the blog), and hence it was indeed quite strong. I think MM made some attempt to reverse in April or at least entertained the thought, but it would not be until May when the IT ended and interesting to note the coming IT bear would be more about time than price.
July 2009 -> September/October/November/December 2009: This IT bull confirmed LT bull as well as again leading to an IT bear that corrected more by time than price. A bear had to wait until January 2010 to get a significant price decline, and that IT bear got invalidated, which would be effectively...
February 2010 -> April 2010: Not an official IT bull but it invalidated several signals along the way and no one here can forget it. It would lead eventually to the flash crash, and one could argue that just had been nature punishing the excesses of this bull.
August 2010 -> December 2010/January/February 2011: Some could say the current bull we are in is similar to this one by how extended it is and how it avoided getting to IT bear status along the way, but there are differences as well.
If there's a common thread to all this, it would appear IT bulls that were short in time span, speedy in price, were often followed by IT bears which did more damage via price than time. In the same way, those IT bull that were very extended often led to IT bears where considerable damage was done in a short time span which undid quite a lot of the progress that had been made.
So we can expect that on this occasion? Possibly, especially considering that after 3 bullish OpEx weeks + 3 bullish months, the market does appear show a tendency to correct, at least to some extent, if not top. The larger context, though, remains the 900 pound gorilla in the room in the sense that are we building a cause, the effect of which is the bear returning with a vengeance? Or will we look back and believe that due to the speed of LT bear last August we actually saw a terminal move then?
I am still of the opinion that we are building a cause, but alas, I never thought we would be >1400 by now. All I know is that the stops I have had saved my bacon, but it was my stubbornness and bias occasionally that led me to being wrong as well. So in taking a bit of a break from trading and just watching/reading/observing, the above were some weekend thought.
I have some things that would suggest this week could see a bearish turn or at least a correction beginning at least by Wednesday, but unless I see it concretely matching it is just anticipation. Though we do see an overnight topping and VIX is in the green as I am typing this out...
