Please take a look my unadulterated weekly line chart:

Chart 1

 

click here 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:

Chart 2

 
click here 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
Trading Tutors Team