Note no4 for thistle ;-)4 May 2012 23:46
But as the months and years of cyclical-bull rallying mount up, naturally the background level of fear steadily fades. So on average as bulls mature, fears of a big selloff (even a correction) wane dramatically. And with fewer traders motivated to sell rapidly, toppings become even more drawn out. Thus probabilities favor major topping processes lengthening as a bull market slowly matures.
And with our current cyclical bull being born way back in March 2009, we are now nearly 38 months into it! The average lifespan of previous mid-secular-bear cyclical bulls in modern history is just under 35 months each. So our current cyclical bull is definitely getting long in the tooth, drawing out toppings and pushing the VXO to lower floor levels than we’d have any chance of seeing early in a bull.
By these later gradual-topping standards, we haven’t yet seen enough time between various milestone VXO lows first being hit and today. And this comparison looks even more lopsided if the month between the latest SPX interim high and now is subtracted out. Thus in VXO-decay-curve terms, it sure looks like the SPX hasn’t topped yet but is probably on course to sometime in the next couple months or so.
Naturally we are closely watching this unfolding topping process in the bunker. It is very important. While the best case is this coming topping merely precedes another mid-bull correction, there is a good chance it may actually mark the end of this cyclical bull. And if that proves true, we are in for another brutal cyclical bear that will probably batter the SPX back down near its secular support at 750 over a couple of years!
While cyclical bears can indeed be very profitably traded on both the short side and long (sharp bear-market rallies), the necessary trading strategy is radically different from what works in cyclical bulls. If you haven’t traded through a cyclical bear before, or even worse don’t know one is upon you until too late, you are probably going to get slaughtered. Thankfully we can help you navigate whatever is coming.
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