Another Inflection Point

A few days ago I was saying we were at an inflection point, and we slipped by that one to the up side. We're kind of on the same inflection point here in that most of the market has rallied up almost exactly, eerily, to its previous high for the year, which for most of the market was in early November. The Nasdaq 100 has gone slightly higher than its previous high. The positive/negative number for the Nasdaq 100, after reaching its all-time high that I've ever seen of 5.03 on November 5, did drop after that as we had a bit of a decline that went on for a few days, but now is getting back up near that record high again.

The positive/negative numbers for the Nasdaq 100 since that record high on November 5 have been:

5.03, 4.76, 4.57, 4.87, 4.38, 4.58, 4.45, 3.79, 3.66, 3.34, 2.75, 3.22, 3.37, 4.42, 4.00, 4.12, 4.57, 3.93, 4.41, 4.54

So this could be it, that November 5-ish was the high, we rallied back up, and now most of the market will head down. Or, just as likely, we go spurting up here for one final very strong rally of a week or two to really kill those who are shorting the market and get them out so then the market can go down. I had said earlier I thought it was a 60% chance that the high came in on November 5. I'll lower that to 50% chance that the high is in, 50% chance for one more strong rally of a week or two. The reason I have increased the chances for another rally is the numbers on the S&P 500 are still fairly negative, although the negative money did go down a bit. The numbers for the past week:

Monday: 74.28 positive/173.28 negative

Tuesday: 169.90/171.25

Wednesday: 89.44/131.95

Thursday: 96.29/130.75

Friday: 79.72/130.45

So you can see the money on the negative side was in the low 170s, as it had been for several weeks, staying almost exactly the same. Then it falls to the low 130s on Wednesday and stays almost exactly at the same number for Thursday and Friday. I had mentioned before that I am wondering more and more whether the $200 million man didn't park half of his money on the negative side and then played with the other half positive or negative, whichever he wanted to lose at. I remember telling Jeri back near the low in July that I felt like parking some of my money on the negative side because I know where all of this is going to end up. Fortunately I didn't do that. But that might be exactly what the $200 million man did. If so, he finally started to crack on that idea this past week. And also if so, I really think the market needs to get totally rid of him on the down side before it can move down like it wants to. So that's why I suspect one more strong spurt up, designed to get rid of this guy and those like him. On the other hand, as I said, it is ominous that we have rallied almost exactly to recent highs, which means this could be it right here. So that's why I say 50/50 at this inflection point.

But either way, I am not even a teeny bit changing my position that we are at or near a very important high, which will lead to a decline lasting quite a while, at least several months. And the possibility will never go away that we are at the jumping off point for the worst economic decline in history. That is based simply on the head-and-shoulders pattern stretching from 2000 to the present. But then to see the positive/negative numbers go up to numbers almost twice what we saw at the highs in 2007 makes me think that horrible possibility is more likely. You've been warned.

Rob