Reversal Time

In keeping with the spirit of Elliot Wave, they say write more when you are are sure of something and less when you are not sure. While we can't be sure of anything in the markets, there are a lot of warning signs these days. As I wrote on Nov 5/10, when the sentiment is universally bullish it usually means a reversal is coming, and today we got confirmation. Shanghai down 5-6% overnight, which means the commodity rally is on hold for a few days at least or possibly longer. I'm not sure why I'm always surprised that we can give back gains so quickly in the market and reverse all the upward momentum in a matter of days/weeks. All the warning signs were there: lots of new highs, universally bullish sentiment, cracks appearing (in the form of flash crashes), etc, etc means I need to be hyper-vigilant for signs of a reversal. The next question becomes how long is the reversal? Longer term I'm still bullish but we need to digest this correction. Funny too, commentators are blaming fears of a rate hike in China for sparking the correction. A brand new fear for the markets - nothing fundamental but that's what gets blamed today.

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