Regression To The Mean

Regression to the mean. There is one universal law in this business and it never, never gets broken. Price always regresses to the mean. This one is like death and taxes. It is never violated. And the further price stretches in one direction, the harder it moves back once the trend comes to an end.

Folks, we are in the panic chasing stage now. But let me caution again that there is no scenario where price can stay this stretched above the mean for any significant amount of time. Try to ignore this nonsense that intermediate cycle lows can occur as sideways consolidations measured only by time, and not include a correction in price.

I’ve marked every time over the last 16 years where price stretched far above the mean. And every time gravity pulled it back down. This latest rally is more stretched than any other time in the last 16 years. You are an idiot if you think this time is different. It’s never different, and regression to the mean never fails.

It’s impossible to predict when the top will occur. However, I’ll guarantee that based on how far this rally has stretched, the intermediate cycle low (ICL) in a couple of months will be so devastating that almost no one will be able to buy. Think of the market as a pendulum. The further price swings in one direction the further it’s going to swing back in the other.

******** 

Courtesy of http://blog.smartmoneytrackerpremium.com/