It was the day before Christmas, and all through the house, traders were shouting, "Sell! Sell! Get me out! We are going to hell!"
It was the day after Christmas, and all through the house, traders were yelling, "Buy! Buy! Buy! All is well!"
Fifteen calendar days later, the Santa Claus Rally has sent the S&P up a harmonic 270 points. It now is vulnerable for a sell off.
This chart shows the longer term view from the Fireball top in late September, early October. Since then, the S&P has declined in a clear six moves, the last being the Santa Claus rally.
In a normal Chaos Clamshell, a move 7 would test the December lows. This is not a hard, fast requirement. Most fractals have one "runt" move. So the move 7 may be a runt move.
The chart shows a rainbow of exponential moving averages. Their lengths are 1.5, 3, 6, 12, and 24 days(heavy red). Just like in moves 2 and 4, move 6 has risen above the 24 day EXMA. For a clear move 7, the rainbow of EXMAs must converge, turn down, and diverge into the move 7 low.
Overall. the market remains in a bear market. Nearly all of the popular bull market stocks have suffered serious declines. Yet even in bear markets, there can be spectacular rallies. So it helps to understand how chaos works in markets. For more, see my courses at Moneytide.com.
This content was published on Dr. Al Larson's Chaos Clinic which you can attend each Friday for free.
Dr. Al Larson has developed a complete Chaos Model of Markets, four unique courses that let you become a Certified Chaos Trader, some very unique eMylar fractal pattern overlays, and tools that permit forecasting individual stocks and markets years in advance. You can also sign up for a free weekly email, and attend a free Chaos Clinic on Fridays. To learn more, click on the author's profile.
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Information on this page contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions.