Mike, would you have time to see how this Didier Sornette exponential pattern matches the current environment?

We had a pull-back in March and I'd like to see if this pull-back was fitting the Sornette curve and then mostly what possibly could happen down the road. Is it a break and then race to a new high or a break and then bounce and then fail again?

Also, do you think that we are in the process to an exponential move up in the S&P500 and not just the Momo stocks or the Nasdaq?

As you can see in the attached Figure, the pink curved trend line corresponds to a QE infinity that is slowing down somehow. That would indicate a choppy market for the next months. Of course, we could also see an "end of QE" type of move such as we saw with the green and blue curved lines.

The other aspect that we might consider is a "buy all and everything" with free recycled money out of China. The hypothesis is that Chinese oligarchy, Chinese funds and Chinese companies with international activities want to park funds out of China because they know that their real-estate market is imploding, which means deflation and more Yuan printing. Buying anything in US$ is better than keeping funds in Yuan.

My hypothesis is that China is exporting mal-investment to the US, which is bidding everything US$ based, disregarding value (to the continuous chagrin of John Hussman)

http://www.hussman.net/wmc/wmc140602.htm

Rumors of a European hidden QE next week is also good fuel to the fire.


Pascal

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Quote Originally Posted by mscott View Post
I am detecting super-exponential movement in the markets. This can lead to bad news as it means more than just an overbought situation is before us. The chart below depicts three times that the price curve bent upwards on a log scale chart. A straight line on a log scale chart depicts exponential growth, thus these are super exponential. So some cyclical bull markets end in a blow-off phase, the prior two did and the jury is out for today.

Attachment 20376

The chart also depicts what the first year in a new cyclical bull market looks like (powerful). Some people believe that because we had a 20% correction in 2011 that that was a bear market and we began a new cycle in late 2011. I think the preponderance of evidence suggests that that was just a big correction in on ongoing and now 4 1/2 year cyclical bull market. This is old and the super-exponential phase we are witnessing may mean that we are approaching an endpoint.

The only work that I am aware of that attempts to define an endpoint in a super-exponentially growing market is Didier Sornette's Log Periodic Power Law technique. For what its worth here is an attempt at the analysis.
The critical time parameter (tc) that produces the best fit suggests that we are now arriving at a regime change (actually Monday is the critical date).

Attachment 20377

I will say that October 31, 2007 had a day that is reminiscent of what Friday looked like. That was the end of a super-exponential growth phase at the end of a cyclical bull market.

I am uploading a new watch list in the stock selection area. Because of the overbought situation most stocks I would want to own are extended beyond safe buy points. This makes the list very short. I am listing here all of the stocks that I do want to own if a buying region develops. I own some of these already. These stocks have good earnings and sales, most show accelerating earnings, they show institutional buying and have been behaving well. They are just mostly not at a safe region to make a new purchase. We need some kind of a pull back. This will be tricky because the implications of the top of this post is that we just may get a pullback that doesn't stop for a while.

ACT
BLOX
CBI
CLR
CRZO
FB
INVN
KORS
NQ
NSM
NUS
OAS
OCIP
OII
PCLN
PRAA
PRLB
QIHU
SFUN
TSLA
VEEV
VRX
YNDX