PSYCHOLOGY CREATED THE OCTOBER BOTTOM AND NOW IT’S CREATING A JANUARY TOP
Significant market tops and bottoms are psychological events...nothing more. When I put a majority of my cash to work in leveraged long ETFs at the October 4th bottom it wasn't due to any fundamental data or statistical insight whatsoever. It was purely a trade that came from knowing that the market HAD to rebalance the longs and shorts before it was able to resume the downtrend.
The job of the market in rebalancing the sentiment is nearly complete. Bears are diminishing in numbers and bulls are growing more bold in their conviction that the October lows are as bad as it gets. With that said, the second phase of the bear market will begin in short order.
Here are two charts demonstrating the challenges and intentions of the market at this juncture:
click chart to enlarge
DJIA 120 MINUTE CHART
QQQ
