Fake Out: A Rally Built On ‘Hot Air’

Right at the time when markets were making new highs recently I mused whether this rally was based on hot air. I wanted to follow-up on this assessment in light of the recent small pullback and provide an update of some of the technical signals. The bottom line: The technical evidence appears to build on the ‘hot air’ message and suggests that new highs may have been a fake out.
I’ve long outlined my fundamental and structural concerns about financial markets and I won’t rehash them here, but you can read all about them in the Market Analysis section.
One of the most fascinating aspects of market psychology is participants’ tendency to get bullish at new highs while folks like myself, who are voicing concerns, get often dismissed or even outright ridiculed. That’s actually fine by me, after all seeing headlines like the ones below is often the best recipe for a nice contrarian trade set-up:

This post was published at Zero Hedge on Dec 4, 2016.