In a prior post I pointed out that the $NASI turned down but the Kagi still had to go up a bit more and give us a little black cap, suggesting that the Complex Top still had a little more playing out. Two down days both ending in just a final blip up at the end of today told me to pay attention to a pearl that teddy taught us yesterday on Oil Trader's Blog...he suggested, at least yesterday, that the bears really still have taken control. The Ultimate Oscillator also turned down, so I decided that I better start looking for a Completed Complex $NASI Top that never developed the thick black line (it is called the yang and is laid down when the prior peak price is exceeded). This "imperfect" Complex $NASI top, that we seem to be experiencing now, would just keep the thin red yin lines throughout (i.e. the prior peak price was never reached). I found another one in June 2007.
Four points:
1. The Imperfect Top that we have just probably completed has similar technical indicator values (orange lines) as the June 2007 Imperfect Top.
2. The SPX ultimately did drop 8.28% from the price associated with the 2nd complex top peak in June 2007.
3. However there was a third yin top (see Blue arrow on Kagi chart & Green arrow on other chart). The SPX first went down 2.29%, then up 3.69% to the third peak, and then down 9.47%. The third yin peak took another month past the second peak to unfold.
4. The percentage changes from the 1st peak to the 1st nadir to the 2nd peak was 2-3X greater for the 2009 vs. 2007 Complex Top. Of course this can be further amplified with leveraged ETF's.
I plan to get rid of the few long positions that I have left, but I will only short cautiously for now until I'm sure that we will not have a third peak. If the SPX MFI does not go back up over 50 (see lavender arrow), it should be "safe" to short.
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