Blow Off Top!

Sometimes the STU is a joy to read.  Tonight's STU is an example.  Hochberg begins with the extreme sentiment across so many markets that have spiked:

Swiss Franc 97%; Euro 98%; Yen 93%; U.S. Dollar 7% (essentially the opposite of the euro); Crude Oil 93%; Heating Oil 93%; Gold 97%; Silver 97%; Platinum 93%; Corn 93%; Oats 94%; Soybean 97%; Soybean Oil 98%; Soybean Meal 93%; Cocoa 98% and the CRB Index 96%. Not far behind these 90%++ readings were U.S. T-notes 83%; Nat Gas 88%; Wheat 85%; Coffee 86%; Sugar 88% and Cotton 89%.

Source: last night's Daily Sentiment Index readings from www.trade-futures.com

As they note, serious tops in markets, especially commodities, are often preceded by a blow-off.  The implication is a rapid reversal across all markets.  All go down, including equities, except the lonely Dollar, which bounces.  We should know in the turn window next week.  Watch for the Euro below $1.50 and the Dollar Index above 75 to confirm a strong Dollar bounce. 

The Naz has completed a "textbook" triangle and now should drop in a fifth wave thrust down at least below the wave 3 (Jan22) low of 2202.  The STU gives lower targets based on Fib relationships of the whole movement since the late Oct07 highs. 

The Dow and S&P they still have in a nested 1-2 of three degrees, albeit the final i-ii is a bit stressed since ii retraced 99%.   Put differently, after the thrust up from Jan23 to Feb1, the Dow has essentially been flat in Feb until the last few days.  It came back to *just* below the Feb1 level then dropped hard.  Since the wave 2 of the drop off Oct07 was a zigzag, this could be counted as a wave 4 flat or triangle, or a smaller degree wave 2 flat rather than nested 1-2 and i-ii.  In a Zoran sense, we had a thrust off Jan23 and a plateau since then.  The sharp drop looks like a bifurcation move out of the plateau, but we have not yet breached the trading range.  Hence to support the fast downside case, we would want to see a breach of the Feb low in the next trading day or two.  Otherwise the Naz may fall but the broader markets may continue a complex corrective pattern.   

Comments

[Skeptic Waver]

What is the Daily Sentiment Index number for the S&P and Nasdaq? Do they support Hochberg's count?

[wavechart.com]

I don't follow the Daily Sentiment Index...but, the CBOE Put/Call Ratios are in Buy Signal territory.

[george]

in regard to the blow off extreme sentiment readings-
it seems to me if there is a big drop the t-bonds and t-notes
should rally significantly as they have during the previous smaller declines of the past year. example this past friday the t-bonds rallied significantly as the dow industrials were down over 300 points. most investors when leaving the stock market don't buy an inverse market fund. they buy into treasury mutual funds. t-notes and t-bonds both went straight up during the crash of 1987.
george

[deacon]

with YM -100 now on sunday nite, looks like the 'Puetz Panic' window is open, Puetz reported market crashes after a full moon following a solar eclipse...was a blood red moon as well...bullish election (http://www.chartoftheday.com/20071228.htm?T) year chart now, but after ides of march the market has had many difficulties over the years