When will this rally top, when will there be sign of distribution. The truth is the SP500 has been a freight training to higher highs. Yet with the Fed operation Twist soon to end in the coming months one must feel we are very close to a mighty peak of this rally.
Price has been moving at greater than one unit of time to two units of price (Blue Gann angle 1x2 ,time x price), the price advance is nothing short of impressive and an exact mirror of QE1 and QE2 goosed up rally's. However both the two prior QE were followed with exciting price corrections. The market is not motivated by any other fundamental story, is all about the juice, juice on or juice off. If the fundamentals did motivate price action then we would see more 1% down days as the news would be used to shake out weaker longs, but this market is blindly bullish until the juice runs out. Just like the drunk at the bar.
The SP500 Chart
Operation Twist ends in June 2012, The month before and the month after is the expected correction time as the below chart suggests.
We have been expecting a cycle top between Feb and March 2012 as the SOX chart suggests, if the juice from the Operation Twist is strong the at the very least the price top will be skewed to the cycle top, if the juice is very strong we may get an inversion to the cycle.
The strong rally near its peak does suggest is it wise to hold long VIX ETFs , as every one is seeing the same thing, and thats never good for higher highs. The option market is saying the exact same thing see here for more: via Zero hedge.
..."While stocks are surging in nominal terms, the options markets are increasingly pricing in greater and greater downside risk concerns. Currently, we are at record levels for this so-called Skew"..