Assuming one day we do get a noticeable pull-back in this crazy market, how low could it reasonably go? I drew some lines that may be targets, please vote or suggest your own target. Proposed Targets: 117 - area of consolidation in March 115 - Jan Top 112 - March Gap 109 - Feb Bounce 104 - Feb Low
i feel stupid talking about downside targets when the biggest close-to-close drop we had in the last month was ~0.7%. without bad news this market may keep going up forever. of course even bad news are good news somehow. look at Poland: the president and a bunch of senators are dead and PLND (Poland ETF) is up 3 days in a row! this is an irrational market at its finest.
Couple stdevs below the 50 day would shake out some liquidity for the long only funds, run the vix good and setup for the next leg on a healthier move. When is the question though...no clue. "it is a bull market, you know"
my working hypothesis is that we will have a swift correction as in Jan. Notice that Nov-Jan advance left two gaps (in Nov and Dec). despite the huge (~13%) and lengthy run-up (2.5 months), those gaps filled very quickly once the decent started (3 days for the first one ~4% drop and 8 days for the second one ~7.5%). if you look at GAP 3 from March, accidentally we are also about 7.5% away from it (similar to Nov Gap 1). I am projecting that it will take ~8 days to fill it once the drop starts. this rally is more overbought than the previous one (>16% in 2.2 months), so it is more likely to fill the gap.