November saw the largest inflow into stocks in the index's history, surging the index to a new all time high.
Their statement was even more noteworthy;
“The retail investor has become a bit more of a believer, we don’t want people to get overzealous, if you will. This is controlled exuberance.”
Did you ever hear the term 'Dumb money'?
That is the term used in the industry for retail investors!
The reason they are referred to as dumb money is because the typical retail investor usually dives in at exactly the wrong time.
Now, dumb money just went 'all in' for stocks when the main index's are sitting at historically overvalued, overbought and over bullish extremes!
There is no such thing as controlled exuberance!
Be aware, stock market tops look like this!
Now down to business.
TOMORROWS RISK EVENTS:
USD: Unemployment Claims.
EUR: ECB President Draghi Speaks.
GBP: Halifax HPI m/m.
JPY: Final GDP q/q.
DOW JONES INDUSTRIALS
My Bias: market topping process completing.
Wave Structure: Impulsive 5 wave structure, topping in an all time high.
Long term wave count: topping in wave (5)
The DOW seems to have corrected higher today, the price move was overlapping as a correction should be and should be followed by a decline in wave '5' blue.
The wave form off the high is developing quite nicely so far although it is very early days in this downturn.
Initial support lies at 23927, the low of the previous wave 'iv' pink. A cross below this level will add weight to the short term bearish case.
The developing downside structure, coupled with the sentiment extreme I wrote about at the beginning,
All fit well with the idea of a topping market.
For tomorrow; watch for a decline into the trendline to complete a five wave structure off the high. At that point I will look for a three wave corrective rally to complete an Elliott wave signal off the high.
My Bias: Long to a new all time high above 1827.
Wave Structure: Impulse structure to a new high.
Long term wave count: wave (3) above 1666.
GOLD has remained fairly flat today, which adds to the idea that wave '5' pink is still unfolding.
Support at 1260 is holding the price for now, but I expect we will see one more drop below that level into the lower trendline at 1255 which should complete the decline.
4hr momentum is now rising off the low and will shortly create a positive divergence form the price.
I will wait to see a clear bullish centreline cross to shift to a bullish stance in the short term.
By Edna Glynn