Updated from the January 2013 Trigger$ Edition
Wondering when this delusional rally will end? Where is the top and when will it be in?
There is one technical topping tool that has proven very effective in answering this question with a fair degree of accuracy. It is the application of the uncommonly used Fibonacci Ellipse.
In last month's Trigger$ we predicted the January rally within what we believed to be the controlling Fibonacci Ellipse. Now we need to view what that Fibonacci Ellipses is telling us regarding what is ahead.
We are very close to a short term top, but we are not quite there yet. Traders need to understand that this short term top is not the Intermediate / Long Term top we have been calling for and still expect it to occur in the proximity of the March 15th Quadruple witch. Beware the Ides of March.
Our Macro Driver$ in this month's Trigger$ shows the Global ECO's are following a very clear cyclical pattern (illustration to the right), resonating from coordinated central bank actions.
Citigroup Economic Surprise Index has moved below zero. On the past 7 occasions when this happened the near-term equity upside was capped. The average maximum upside of 1% and average drawdown of 8% seen over the following 3 months demonstrate the asymmetric risk-reward.
We fully expect a near term scare in interest rates to ignite a correction but it will stay within our controlling ellipse before rising to a final top.
A Major Long Term Right Shoulder Formation Pattern
Fibonacci Time Extensions
Our original timing predictions (shown below) were based on our Fibonacci Time Extensions. This is a separate analysis from Fibonacci Ellipses but must 'plug' or we fail the test of symmetry which chaos and fractal theory dictate. We have a a very tight correlation that in turn matches fibonacci clusters and Bradley turn cycle dates.
The 18 Month View