Revisiting the Nifty Fifty & The Rollover Syndrome

Formations that go on this long are usually the Real Deal

It’s time to revisit what I thought was one of the most important notes I wrote last year — The Nifty Fifty & The Rollover Syndrome from November 16th. If you missed it, I would take a moment to read it now. If you read it, you may want to skim it again, and keep in mind the opening point remains the most important: “Tops are a process, bottoms are an event.”

A key highlight during the 1970s Nifty Fifty was that they did not crack all at once. Some started flattening, others kept going. The market became increasingly disperse (sound familiar?), but when they all start diverging, the market was telling you something was happening. It reminds me of Jesse Livermore when he talked about how he would start building a short position in the market by selling names one at a time as the leaders started to stumble, until the whole market finally broke.

Revisiting a few of the charts from my November 16th note shows where I think the most acute pressure points are. As you look through these, keep in mind that formations that go on this long are usually the real deal.