The S&P500, as many of the indexes that have been driven into a state of hysterical overBULLishness, overvaluation and overconfidence, the "OVER" state in the cycle tends to occur in concert with an overshoot or an overthrow of resistance. In the case of the S&P500 we are involved in several overshoots at once. The issue with overshoots is that you can not exactly measure when they are going to burn themselves out because market participants loose their perspective with the exception of their OVERcommitment to the emotion of the moment. However, because these emotions are so high is exactly why an overshoot does not allow for extended retesting. As soon as you see anything more than one retest the overshoot is likely going to be turning into an overshoot in the opposite direction which is likely the case that is setting up here, not only with the markets hugely overvalued but with all of implosion of credit that is occurring all over the world that the central bankers just can not seem to find a way to sustainably re inflate.
The credit implosion is just beginning to get momentum in this new leg and will likely accelerate throughout Europe and get blown wide open with Japan’s Government Bonds going into default. Moreover, since central banks and the world governing bodies are now a chaotic mess and highly discordant, it would not surprise me if Central Bank officials in China lean on JGB’s to further ratchet up the pressure on Japan.
JGB’s open in perfect margin call territory…perhaps china central bankers can call shorting JGB’s "a hedge” instead of a prop trade…and pull a JPMorgan...
