think we are on the verge of entering the euphoria stage of this cyclical
euphoria phase is where the rate of change starts to accelerate as traders
become convinced that the economy is booming, and will continue to boom into
the foreseeable future (the last bull market), or in this case that QE3 is a
magic elixir with no unintended consequences.
During this final phase the character of the intermediate cycles should
change and instead of a modest move above the prior intermediate top we will
see a strong acceleration and a significant and sustained breakout above the
September high of 1475. All of the traders that have convinced themselves
that QE is having less and less effect are about to be caught off guard as we
move into the euphoria phase of the bull market.
You can see in the chart below that in 2006/07 the intermediate cycle
accelerated rapidly past the prior intermediate top at 1326 in a classic
runaway move. While this certainly felt good at the time, it was the
beginning of the end as the housing and credit bubbles began to implode.
think we are on the verge of something similar as I believe QE3 will drive
the market high enough to test or marginally break the all-time highs.
However, it’s also going to start an upward spiral in commodity
inflation that will eventually poison this fragile economy and be the straw
that breaks the camel’s back.
For the next couple of days I'm going to run a Christmas special, one penny
for the month of December. This is only valid for new subscribers. If you
have already subscribed to the SMT premium in the past the system will charge
you the regular $25 monthly rate. At the end of the month your subscription
will convert to the normal monthly charge unless canceled before then.