by Chris Vermeulen of The Technical Traders
Euphoria is a type of market rally where valuations, real market expectations, and global market concerns are pushed away from view while a trader based rush to rally takes place. One of the clearest examples is the 1995 to 2000 DOT COM US stock market rally. As the Internet burst into homes and businesses across the world, the US-led the way with dozens of new Internet-based IPOs touting glorious expectations, potential earnings and more. Everyone had the idea this new medium would dramatically change the economy for the better and breakthrough traditional economic boundaries.
The rally that took place in 1995 through 2000 was incredible. The S&P 500 rallied from 463 to 1535 – +235.57%. What we find interesting is the “price wave formation” that took place within that rally. There were a number of key price rotations that took place as the market continued to rally, we’ve labeled them A, B, and C. The first rotation, A, took place in July~Dec 1997. The second, B, took place from May 1998 to November 1998. The last, C, took place between January 1999 and November 1999. Technically, these rotations are significant because they represent “true price exploration” related to price advancement. The price must always attempt to identify true support/resistance levels while trending.
When we compare the rally from 1995 to 2000 with the current rally in the US stock market, we can see a defined level of euphoric price advance after the 2016 US elections. We must also pay attention to the previous price advance from the 2009 price lows as the global markets were struggling to recover from the Credit Crisis. Our research team identified the A, B, C rotations in the current price and associated them to the similar rotations in the 1995-2000 price rally as “key components of the current rally and a potential warning sign of a pending top formation”.
Our researchers believe the QE processes of the global central banks have set up a similar type of euphoric price rally in the current global markets even though current economic metrics are warning of weakening economic activity and weakening global market output. The US Fed and global central banks seem to want to keep pumping money/credit into the global markets to keep the rally going – most likely because they are fearful of what a crash/correction may do to the future growth opportunities around the planet.
Yet, our research team focused on the C rotation in 1999 and 2019 – a full 20 years apart. What interested our research team the most was the fact that the rotation in 1999 set up a full 21 months before the November 2000 US Presidential election. The current C rotation initiated in January 2018 – a full 34 months before the November 2020 US Presidential Elections. Anyone paying any attention will recognize the 21 and 34 are both Fibonacci Numbers – relating a 1.619 ratio advancement.
Are we setting up a massive top in the US stock market based on a Fibonacci price range expansion related to the patterns we have identified in this SP500 chart? Have we advanced from the 2000 peak and 2009 bottom in some form of Fibonacci Ratio expansion that aligns with the C rotation pattern we have identified?
http://www.thetechnicaltraders.com/current-rally-similarities-to-1999-are-we-nearing-a-top/
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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