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Please take a look my unadulterated weekly line chart:
click to enlarge
Stand back from it. Study it for a few minutes please.
It is a log scale (logarithmic) so it shows the relativity of the market moves rather than what we see in a standard absolute scale.
Using a line chart breaks a market down to its basic simplicity. And as I look at the chart I ask who is buying this market, who is pushing it higher and do they know something I don’t?
The Doom and Gloom merchant Mark Faber says the market could go higher from here because as inflation develops the market will grow at an inflationary pace. Well, I am not too sure about that. And I am not too sure that he can retain his doom and gloom mantle if he starts talking optimistically - as it may go to yours truly.
Now I have missed out on the run up since March but there is no way I am going to get on board at this pace and I just cannot buy without some form of pullback.
So I look at a more detailed chart for clues:
click to enlarge
And I contemplate, might the market go to 5000 or 6000 or 7000 without any pullback. Or am I just being silly. Or is the market being silly?
What I do know is that markets do take a breather. I also know the higher and faster they rise the harder they fall. But where and when I am not prepared to say precisely as no-one will believe me.
But if Mr. Faber is right then what we are laying the foundation for is a bubble of the likes we have never seen before.
Please, someone show me the light.
Enjoy the ride
Tom Scollon
Chief Analyst
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