In previous posts, I had outlined my reasoning why I believe the Shanghai is in a BARF or a bump and run formation which has been the formation of almost each and every crash. I had made detailed graphs of the Shanghai illustrating what I felt the line of no return would be set at. The Shanghai very much resembled the Nasdaq-100 of 2000, the DJIA of 1987 and the homebuilders. Now I believe it might be up against a very solid trend line which will mark the point of no return in which it will sink back to the 1-2k level if violated. I also believe the DJIA's price is set up in the apex of the pricing triangle that was created by trend lines dating back to 1998 and 1987. The $TNX is in going upwards in a grand supercycle and the WTIC might be moving a lot higher then we have anticipated. While the indexes make fresh new highs, the TNX will soon follow its nasty course. There is also one other thing that is noteworthy. The Euro and the USD index is turning around. There is a relevance between the USD index and the DJIA. When the USD index started falling in 2006, the DJIA started rising. When the USD index started rising in 2004-2005, the DJIA sputtered around like a hurt child. While everyone is celebrating grand new highs, I can only imagine the true grim reality that is about to befall the indexes in the near future. Tonight everyone sleeps well enough, but these next few weeks might unfold a grim reality. There has been a 30% plus increase in margin debt over last year which never spells good things for our SPX. The DJIA price will have to exit out of the triangle that its set in otherwise a fall of maybe 500-1000 points is in the cards. The path ahead will be rocky and will shake out many traders...
It could be in a triangle if you really want it to be. Triangles are subjective or the way it fits to the eye of the beholder. But most of the time the eye of the beholder is dirt poor.
The eye is not poor the beholder is. FWIW the OPs scenario is as likely as anything else you guys can dream up.