BullBear Trading: Stock and Financial Market Technical Analysis

The Long Term B-Wave Top Has Finally Arrived

Long Term B-Wave Top Has Finally Arrived

As regular readers of the BullBear Market Report know, I have been expecting to see a B-wave high in a largely sideways long term formation. It seems to me that chances are fairly high that we have seen the top of the B-wave rally off the September 2022 low. The next move is then a C-wave decline, the third movement in the pattern that started with the top made in December 2021.

This rally has dragged on a bit higher and longer than expected and has lingered for some time above the 2021 high, but technical signs are strong that with today’s news of hot inflation, we have seen the top. The rally has been largely based on the notion that the Fed would be able to cut interest rates and resume its easy money policies, but that seems to have been called into question, with projections for rate cuts dropping sharply in short order.

It’s very likely that the algorithmic machines of the large players can read the same tea leaves, and with public enthusiasm for “the market” running hotter than Fed rate cut expectations, it’s probably time for a trading washout that will set up the next trading buy.

Chances are very high that we have recently seen the first minor degree a-wave decline from the top and that now we will see a minor degree b-wave rally that will recover much of the recent losses. From there, the main movement of the first intermediate term decline will begin. So active traders should be looking for an opportunity to lighten up positions in the coming weeks.

In strategic terms, this is a call for a trading high, so if you have been long from lower levels, this is the time to take profits on the trade and get ready to buy again when this decline completes later in the year. Long term investment capital in Big Tech and the major capitalization stocks is safe, but one could place a hedge here to protect profits. As I have been saying for quite some time, it is time to exit small cap stocks, since the major economic disruptions that will reconfigure all of economics is going to hit that sector hard, with entire swaths of smaller and mid cap issues seeing their fundamental business models eradicated.

Aggressive traders could attempt a short play here, but it’s definitely not a “bet the farm” scenario. A better approach is to lighten up or hedge longs and prepare to buy the C-wave dip.

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