Clever observers have noticed a strange phenomenon: Whenever the magazine covers start trumpeting a bull market the market crashes — or vice versa. This works for Sports Illustrated, and even sometimes in the stock market. But basing investent decisions on such ephemera is a chancy procedure. Nonetheless the punditry and the chattering class has had a field day with the most recent Barron’s’ cover whose headline says: THE STOCK MARKET WON’T CRASH –YET.
We always test these hypotheses by looking at the chart. And as usual the chart restores equilibrium. Here is the long term view:
What do we see here? A market trying to claw its way back to health, with the need to overcome the last high wave points. But it is a market in progress and at the moment it shows no signs of tanking. So much for Chicken Little and his talking heads. Here is the close up:
In the immediate we see buy signals in the SPX and a strong up wave. That is, confirmations of the Barron’s’ cover. We wouldn’t go whole hog. Not till the old highs are taken out. And we would be sscaling in in this epoch, not betting the ranch.
We would also be sniggering up our sleeve at people making their decisions based on the cover.