A history being made again

"A quick word about my betting for next week. I think there is a high chance we may see another mini crash for S&P in the range of 50-100 points down. "  This was what I predicted last weekend and it turned out to be spot one. S&P closed around 3000 today. I think it may still have little down to go probably to 2975ish early next week. 

This is a history making year! We have seen the fastest bear market being formed. Then we are seeing the fastest bull market following. Now the market is making another historical event: an internal divergency that has rarely been seen: S&P moved above its 200 DMA over 3% but less than half of the stocks in the index have managed to climb above their own 200 DMA. In other words, this seemingly quite bullish market has quite few stocks coming along with it! What is more, this is a theme across industries, sectors, and world indexes.

As I said, this is a rare historical event. In the past 30 years, we have only seen once before such kind of dichotomy that happened in the year 2000.  But if we forget about the extreme 3% cutoff but by any amount that S&P was above its 200-day average , and with less than 45% of its members above their averages, then it had happened a couple times more in 2007, and 1999 prior to that. Have you noticed the pattern for this rare event occurrence in terms of timing? Yes, the only three times of the occurrence before were just prior to the historical stock bubble burst. Am I saying we are on the verge of another bubble crash in the same magnitude? Probably not......at least not yet! However, history often rhymes if not repeating it. "What we do know is that periods of rising index prices and high optimism, during markets where relatively few stocks are in long-term uptrends, have a strong tendency to resolve lower in the weeks-to-months ahead."...... a statement from a wiseman that I totally agree with! 

Of course, this does not necessarily mean a huge market crash is imminent but just an early warning sign.  I will share more thoughts in my next blog on this.