The rally in the US share market has been a VERTICAL MARKET as our computer has been warning would unfold. A VERTICAL MARKET is one that takes off yet leaves the vast majority behind because they just cannot believe the rally. I have been warning that this is the most hated bull market in history. The entire bull run during the 1920s was 97 months and we passed that mark last April.
They wrote the book on When Genius Failed over the Long-Term Capital Management (LTCM) debacle. People who create models make one fatal mistake – they are cheap when it comes to data. They even won the Nobel Prize for the model that blew up in the LTCM debacle. Why did genius fail? Because their model was based on data only back to 1971 when the floating exchange rate system began.
Now we have the ECB vice-president Vitor Constancio warning of the dangers of new price bubbles on the markets. Nobody seems to understand this market and they never will without a database that stretches back at least a few hundred years. You simply have to see how the market reacts under all conditions, Here the Dow Jones Industrial Index we extended back to 1790. The computer bought the low in 2009 and has been adding to long-term positions.
Constancio is totally clueless. He has referred the task of investigating this bubble to the regulatory authorities, which he says are known specialists in this area. Of course, if they really knew what was going on they would tell him. They also have no actual trading experience so how are they going to judge what is taking place based upon personal opinion?
The ECB’s caution has its reason because they too fear what is going to happen when they exit from the bond program if they even can. The program has transformed from economic stimulus to a plain outright program to reduce the financing interest rates of the over-indebted Euro-States keeping them on life-support. If this support by the ECB is eliminated, the outbreak of a new debt crisis in Europe could send interest rates soaring and a collapse in confidence in government. Therein lies the crisis. Once capital figures out that it is the governments who are in trouble, it becomes Mario bar the door!
After the WEC, we will make available for $750 – How to Trade a Vertical Market