Can Stocks Melt Up??

After listening to David Hunter, at Wealthion,

calling for the S&P melt-up to 6000, (within six months) The melt-up is now!! I am inclined to recall my prediction of a redux of the late 90’s stock market rally; Giant Stock Rally, and Inside the Turn… I dubbed my melt-up scenario White Monday, in reference to Black Monday in the 1987 stock market crash, when stocks dropped 20% in a day, I said, they will go up 20% in a day.

Time to joust the windmills later, in the previous post I showed Volatility at the crossroads, now I want to put crude oil under the light.

Hunter predicts crude oil will fall in price, and that’s possible. (That’s a nice bounce off the 50dma) The appearance of this triangle is a continuation triangle, but it doesn’t need to break out higher. it can just as well become a reversal and break lower. The point of this exercise, if West Texas Intermediate does break higher the formula puts the price objective at somewhere near $150, which is more even than just before the 2008 melt-down… If oil prices break lower then lower oil prices fit the scenario of Mr. Hunter.

On the point and figure chart of OIL ( the price of the ETN is calculated on a formula subject to the vagaries of buying and selling pressure) needs to rise to 36 from it’s current level at 33.60 to meet the definition of a point and figure BULLISH TRIANGLE, with an upside objective of about 33%. UPDATE: The bullish triangle did not materialize, and the triple top break extended. Horizontal consolidation of these patterns tends to load the cannon as Tom Dorsey says.

Very similar outcomes, on either chart. The difference here is that if this breaks lower the point and figure triangle has no reverse bearing on the outcome. It’s a basic sell signal. The relationship between the two measures, Volatility and Oil does not have any obvious correlation, except $142 oil in 2008 did bring about (among other things) a crash in the stock market and a spike in volatility.

That the two variables are now sitting on their own bullish/bearish precipice. This is highly interesting. If they break in opposite directions I should be surprised, higher oil prices, at this point in the recovery are going to have a negative impact on company earnings. That would cause a rise in volatility. So I would expect them both to move in tandem, but for that we just need to wait, just not too much longer.

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