We are walking on thin ice and everything can change in an instant:…
that the markets are on top means nothing more than attention to details.
In DeMark’s telemetry strategy, one of the most precise combinations is 9 + 13 (a count of sequential bars that ultimately determines a combination that is rare but very powerful)
The last time we saw this combination the index then fell by -9% (in August the trend instead of reversing it had risen again)
So: either we are close to a powerful reversal to the downside (prevailing situation) or the system “recycles” that is, it continues for another long period of upside (in this case)
To complete the vision, therefore, I have to analyze other factors: I take the evaluation of the index to understand if it is at extreme levels of evaluation. And in fact we are at extremely euphoric levels.
The Vix then signals me a positive divergence on a further positive divergence. When the Vix rises while the index also rises it only means that in reality the cost of hedging increases and this only means that traders are increasing the protection of the positions in view of a possible downward movement.
All this to say that we need to be very careful and be more and more cautious: the signal? a good sign is a “Flip Day” ie when the index closes below the close of 4 days earlier. This would “scare” several operators and would be sufficient to create a signal that many investors – under current conditions – would perceive as “dangerous”
Be ready and don’t get caught off guard!