This is the same chart as the one on IWM a little while ago. The Russell 2000 is displaying an exponential function which, put simple means that you start horizontally and end going vertically, straight up. On a semi-log scale it becomes a straight line in which the angle of attack is a function of the variables relative size on the x and y axis.

We have hit the upper trend line 4 times over the past 40+ years. Each time the index reverses and loses about 1/2 of its value.  This is of course a very crude measure, certainly in terms of timing but it does strongly suggest that exiting this market is the most sensible thing to do. Keep in mind that this index climbed some 1300 points in the recent 9 months. That is a rate of 1700 points roughly in a year. It took an entire lifetime to get to that level before!

I would now sell both Royal Dutch RDS.b and General Electric. Both have roughly doubled over the past year. They could go higher but this was the “sure” part if there is such a thing.

We may have peaked about a week or so ago on the Dow, see my previous blog.

This is all predicated on the idea of a diagonal triangle 5th wave, all the way from the lows of the 1929 depression (or, if a triangle in the post WW2 lows of 1947 or so). Each leg does not need to be a 5-wave affaire in this scenario. Note that both the RSI and MACD have been dropping for quite some time. Also, the ten year US bond yield doubled in the past few months and that may well be the Achilles heel of this financial Alice in Wonderland that we are living in.