If you have been following me since 2008 you are probably very familiar with my work. Very often, people will say that I’m too conservative or don’t trade enough. While everyone is entitled to their opinion, it should also be said that I have caught almost every major move in the S&P 500 Index and most other indexes over the past 13 years. Believe it or not, I nailed the 2007 top on the S&P 500 Index to the day and price. In fact, in my seminars I show people exactly how I did it. I also caught the 2009 bottom within 5-days from the low. There are not many people in the world that can make that claim, but it is true. Since that time, I have made many more calls and trades which have captured very solid gains for members in the past 10 years. While I do not win on every trade my record should speak for itself by now.
Along the way, I have learned many lessons when you get into markets like we are currently experiencing. At this time, there are spots of euphoria in several parts of the market, but this is the most hated bull market in history. When everyone is so fearful to relive the 2008 the markets they seem to climb the wall of worry on every pullback. A fair case can be made that every dip has created a short squeeze to new all time highs in the major stock indexes. While this cannot be disputed there are some lessons that I learned from the 2008 trading year that are worth mentioning.
First, when the major stock indexes are making new highs and the large financial stocks are not making news highs it is a warning sign. In May 2008, the markets were soaring higher from a March 17, 2008 pivot low. The rally in the SPDR S&P 500 ETF (NYSEArca:SPY) peaked on May 19th, 2008. That was a 14.0% rally that lasted roughly 2 months. The observation that I made at that time was that the Financial Select Sector SPDR Fund (NYSE Arca:XLF) did not make a new high and actually peaked on May 2, 2008. This was a major clue that there were problems on the horizon. This simple divergence between the two indexes told me a major decline was imminent. Fortunately, this kept members out of the bear trap in Mat 2008 and made members a lot of money on the short side at that time.
Right now, there is a primary bull market that is still in play, so please note this is not 2008. Currently, you have all central banks providing tons of liquidity to the markets, that was not the case in early 2008. But I’m seeing lots of non-confirmation highs in many different areas of the market right now. This is a market that is currently signaling many similar characteristics form May 2008 for a possible daily chart top out. Tonight, in my Bullseye Trading report I will point out some of the warning signals that I’m seeing at this time. You might be surprised at what I show you.
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