What I’m showing here is the three dominant rising trendlines that show the recent shift in character or behavior of the market… to one of urgency to rise and despair on the part of short-sellers/bears.

Often, these type of cycles often progress in the following order for the Bulls:

Phase 1:Doubt, as in “ This is a bear market rally and then price will fall.”

Phase 2:Realization, as in “ Ok - so the market is going higher, but the moment I get long is when it will reverse.”

Phase 3:Euphoria as in “ Oh my gosh I’ve been so stupid to miss this rally that I have to buy NOW! NOW! NOW!”

And, as you might suspect, the cycle takes a different turn for the Bears:

Phase 1:Doubt, as in “ Here we go!  This is a rally to short to plunge the market to new lows!”

Phase 2:Confusion/Realization, as in “ Ok, so I know they’re driving it higher, but I’ll keep trailing my stop higher because the market will turn at ANY point now and the moment I exit my short is the moment it will fall, so I’ll hold on.”

Phase 3:Capitulation, as in “ *$^%@! They did it to me again!  AHH, I have no choice but to take a much larger stop than I thought - gosh there I go again losing money.”

This type of logic has been explained in many different forms, but it still surprises me at how many times it plays out in text-book fashion.

That’s why the first ‘phase’ often has a smaller, more reasonable angle which gives way to a steeper angle which then finally morphs into an absolutely unsustainable angle as price climaxes while bulls pile in and bears capitulate.

No one knows where the absolute top will be, but when you start to see angular momentum increase like this, it’s a safe bet that we’re in the third phase and to monitor your emotions very closely and follow price and be aware of any sudden shift and not get caught in a downdraft.